The Cryptocurrency trading market is somewhat percieved as the investment world’s wild west due to level of volitility in the market. The value of cryptos like Bitcoin, Ethereum, Litecoin soared in 2017, fell in 2018, experienced a jagged-edged increase in 2019 and then took off in the first quarter of 2021 reaching new aths and then plummeting in May 2021.
Winners and losers are made with such tubulence in the cryptocurrency trading market. Oh yes, if no one is losing there would be no winners. It is therefore important that you know how to navigate the market to mazimize your wins. In this post, we discuss 3 cryptocurrency trading lessons that you would have to learn the hard way if you don’t learn now.
Cryptocurrency Trading Without A Plan
You are craving for a particular meal but you don’t know how to make it. You get in your car anyway heading to the market to buy the ingredients for the meal. You are not even sure what to get but you are heading out anyway. You get to the market and start asking around about the meal and what ingredients to buy and how to cook it. How long do you think this would take? Do you think you will end up cooking it right?
Instead of setting out to the market without a plan, you can go online, search for information about the meal, ingredients and various ways to cook it. You take notes and create an estimated budget for shopping for the meal. This way you are better position for success.
A strong strategy that outlines where you are, where you want to go, and how you want to get there is the cornerstone of every successful trader, whether you are into crypto or not.
Before embarking on a trade, you should consider what your main goal is and how you want to achieve it. Are you looking to hold a currency for a short period of time or long term? Why would you want to hold for a long time or short? What’s your investment amount? When is it alright to take profit? Where would you set your stop loss?.
These are just some sample questions to ask yourself as you embark on your cryptocurrency trading journey. It might take some time to construct as you would need to involve research.
However, you would simply be gambling if you trade without a plan or strategy. It might seem like a lot of work but the planning stage in cryptocurrency trading is very important. Failing to plan means you are setting yourself up for failure.
No Knowledge Of The Crypto You Are Investing In
So a crypto YouTuber or guru mentioned a token that will make massive moves to the moon by the end of the month. You rush to invest money meant for something else on the crypto. With hopes that by the end of the month you would have flipped the cash and turned in a huge profit. That is a wrong wrong move! Before you invest in cryptocurrency trading, ensure that you know everything possible about the asset you are investing in.
For example, it is important that you ensure that the token or coin you are investing in is legit. There are thousands of cryptocurrencies today with many more springing up daily. In a fews years from now if not months or weeks, many of the cryptocurrencies available for cryptocurrency trading today will die off. Partly because some of them are purely scam projects created to rug pull investors at some point.
On the other hand, some die because of lack of liquidity over time, no project growth etc. Knowledge they say is POWER. This applies too in the cryptocurrency trading world. Without knowledge about what you are investing in you would be doing yourself a disservice. You would be making investment decisions like a gambler.
Buying High and Selling Low
A lot of traders make the mistake of rushing to buy tokens when they have appreciated in price by 50%, 100% or even more within a short period of time. If you do not fully understand the movement pattern of a crypto you are trading, you should never do this. Many who do this, do so because of the fear of missing out. A term regarded as FOMO in the cryptocurrency trading world. You imagine the cryptocurrency appreciating greatly in your mind. The video below elaborates more on some ommon psychological trading mistakes some traders make including fomo.
The thought of buying a lambo crips in. You believe you will be left with regrets if you do not buy right now. But then as soon as you buy some Bitcoin for example at $34,000, it starts crashing down to $30,000 and then $28,000 in minutes. You freak out and quicky sell off your position, afraid the price might keep dipping to the point where you loss everything.
Going in and out with no sense of direction happens alot in the market. People let their emotions get ahead of them and end up losing everything. Some then come to a conclusion that cryptocurrency trading is a scam. No it not, buying high and selling low in the crypto market is getting your rekted.
You should be buying when prices are low, when its red in the streets as some would put it and then sell when the value of your coins or tokens increase, when its green. In summary, you buy the reds and sell the greens not the othr way around.
Do you have other cryptocurrency trading lessons you would like to share? Please feel free to share in the comment section.