3 most popular misconceptions among cryptocurrency trading beginners
With a huge potential of growth, cryptocurrency market attracts many people who are eager and excited to make a fortune here. Some of them are lucky enough to do it, but most of the newbies simply lose their money as they don’t study other people’s mistakes. In this article we’d like to tell about 3 most popular misconceptions regarding digital currency exchange that are very popular among trading beginners.
We’re not going to talk about such obvious mistakes as falling for emotions or not having a solid plan. Instead, we’re going to give some practical advice that you can start applying right now.
1. Always follow “buy low — sell high” rule
It’s sure as the sun that in order to make money on cryptocurrency you should watch attentively digital currency rates, make the purchase when the rates are low and sell when the rates are high.
But if you purchase something at the low price, there will be no guarantee that this is a good deal and that the price will go up soon.
The fact is that the vast majority of cryptocurrencies, that are now available in the market, won’t stay here long and they’re going to lose. If something has gone down by 95%, most likely there’s a reason for it. So don’t rush to the digital currency exchange only because the currency you’re looking at has significantly lost in price.
The cryptocurrency that you see on the graph below will hardly ever grow up again, so if you purchase it right now, you will simply lose money.
2. Purchase the currency that has the lowest price
You may look at the current Bitcoin price and get really terrified as it is well above $5,500 now. And you may go to exchange digital currency that is much more affordable. Such as Dentacoin, for example. You just buy this digital currency and hope that it will grow one day just as Bitcoin did. But the fact is that it never will.
Never look at the price of a single cryptocurrency unit. Instead look at the market capitalization. This is what will show you what this digital currency rate is about. The bigger is the market cap, the higher is the potential of this or that digital coin.
Market capitalization is calculated by multiplying the price of this currency by its circulating supply.
Let’s take a look at Dentacoin and Bitcoin that were mentioned above.
Dentacoin’s market cap is $48mln, while Bitcoin is already above $92bln. Feel the difference!
Dentacoin’s and Bitcoin’s price and market cap on coinmarketcap.com, 25.10.2017
3. Purchase only one type of cryptocurrency
When digital currency newbies start trading, they make this mistake quite often. They purchase only one type of cryptocurrency and hope it will win in the long-term run. But how can one be so sure that this or that coin will eventually grow?
The fact is that 90–95% of them will eventually fail. This is mere statistics. So there’s a huge opportunity that the one you’ve selected will fail as well.
On the contrary, if you diversify, you can minimize your risks. Buy at least 10 different coins. Then 1 or 2 of them will win in the end and cover your other losses.
This rule applies both to traditional markets and to the market of cryptocurrency.
So, these are the most popular mistakes that you may fall for once you get involved into digital currency exchange. Don’t let emotions wash over you, get rid of the gambler’s and the shopper’s mindset and develop trader’s and investor’s mindset instead.
