10 Common Mistakes of New Crypto Traders and How to Avoid Them

The beginning of the journey of cryptocurrency trading is often filled with a lot of hope and excitement. Of course, it is expected because cryptocurrency has made many people rich and is still doing that. However, new traders often face challenges navigating the crypto market mainly due to inexperience. Unfortunately, there are other common mistakes of new crypto traders that affect their trading progress.

For new traders the allure of making a substantial amount of profit may cloud their judgement which makes them ignore some risks. Fortunately, understanding the common mistakes of new crypto traders enables them to identify these pitfalls. In this article, we will discover these common mistakes and discuss ways to avoid them.

Here we go!

Top 10 common mistakes of new crypto traders

Poor crypto knowledge

The success of a crypto journey depends on the amount of correct information acquired by the trader. There are many channels through which one can acquire trading information for research. However, not all of these sources are reliable. Traders must avoid trading based on hype or recommendations alone without a deep understanding of how the market works. A good research involves studying market trends, use cases of specific cryptocurrencies and how well it has performed in the past before investing.

Emotional trading

New traders are prone to making emotional trading decisions due to their inexperience with the cryptocurrency market. However, emotional trading decisions often lead to impulsive actions which may cause significant losses. Furthermore, some emotional strategies such as the fear of missing out (FOMO) are often leveraged by scammers to target new traders. Therefore, crypto trading based on fear of missing out may cause traders to make hasty investments, while fear and uncertainty in a cryptocurrency may cause traders to sell prematurely and lose out.

Short-term thinking

Some individuals start crypto trading because of the promise of a “get-rich-quick” scheme. This has many investors thinking short-term. However, investing in cryptocurrency is just like any other investment opportunity out there. Traders can lose their funds in a bad investment move, especially one that wasn’t properly looked into.

With a long-term investment mindset, traders are more focused and disciplined, therefore, they invest more carefully. Trying to get rich in a short period of time is what leads to losses in crypto trading.

Overlooking transaction fees

One of the common mistakes of new crypto traders is ignoring accumulating transaction fees. With frequent trading, a trader’s transaction fees can accumulate. Ignoring these fees can reduce one’s profits over a period of time.

Using online wallets to store assets

As a digital currency, it is ideal that all crypto assets must be stored in a corresponding digital wallet. Although using an online wallet is more convenient, it is also riskier than storing your coins in a digital wallet. This is because online wallets are more vulnerable to hackers and other forms of cyber malware. However, the best way to store an asset is using an offline hardware wallet. An offline hardware wallet is essentially a USB device equipped with sophisticated hardware and software encryption to protect your crypto wallet’s private keys.

Investing in one coin

Expand your portfolio investments to other crypto assets. There are thousands of crypto assets in the market, as such investing in multiple assets minimizes the risks.

Investing in multiple crypto assets allows you to leverage any of the assets that have a bearish run. However, when doing this, it is important that you Do Your Own Research (DYOR) before investing. Be sure to cover every aspect of your research thoroughly before investing, but diversification is the keyword.

Forgetting crypto wallet password or seed phrases

Crypto wallets are almost impenetrable to outsiders without the alphanumeric key password. However, in a condition where a trader loses their password, they automatically lose access to the funds in their wallet. Also, most crypto wallets have seed phrases that give users access to their assets as a backup. If the seed phrase is lost or forgotten, then there may be no other alternative to gain access to your wallet and your funds may be permanently lost.

Therefore, the security of your crypto trader depends on you, the trader. It would be unfortunate to invest in crypto and lose access to your wallet. Therefore, keeping your crypto wallet safe is necessary to always give you access to your wallet.

Sharing wallet details

Earlier, we highlighted the importance of safeguarding your password and seed phrases. Safeguarding your wallet also involves not sharing these details with other people. These details give access to your crypto assets as such, hence they must never be shared with others. New traders must avoid giving out their wallet personal details. As a matter of fact, officials from a crypto wallet company will NEVER ask you for these details under any circumstance.

Wrong wallet address

A wallet address is a unique alphanumeric key of random letters and numbers that is unique to a particular crypto asset in your wallet. For instance, while buying $DFIX, the address is only for $DFIX in your wallet alone. An omission of any number or alphabet instantly changes the address.

One of the common mistakes of new crypto traders is mistyping the wallet address. When a cryptocurrency is mistakenly sent to the wrong address, it may be unrecoverable. However, there are services that might attempt to recover these lost assets but they are expensive and depend on how well the recipient cooperates.

Falling for crypto scams

In the crypto industry, crypto scammers are always devising new ways to get a new victim. Unfortunately, even traders with experience often fall for some of these scams. However, new traders are more prone to fall for a crypto scam. In 2021, Chainalysis found that scammers stole about $10 billion in crypto. However, this figure has dropped and as at 2023, it was $4.6 billion which is still a significant amount of money.

Scammers use various tactics such as Ponzi schemes, giveaway scams, rug pulls and so on, to lure their victims. Therefore, all traders, especially new ones, must take proactive measures to ensure that they safeguard their assets from crypto scammers.

6 ways to avoid common mistakes of new crypto traders

So far, we have seen some of the common mistakes of new crypto traders. Hence, we must also learn how to avoid these mistakes. Here, a six ways to avoid them:

1. Do Your Own Research (DYOR).
2. Create a clear and realistic trading plan with the help of trading professionals or experts.
3. Set up 2-factor authentication for your wallets. In addition, never connect your wallet to online sites that are not trustworthy.
4. Never share passwords and seed phrases.
5. Start small and scale gradually as your portfolio grows and you get more experience.
6. Employ risk management strategies such as setting stop-loss orders and diversifying your portfolio.

Conclusion

On the outside, crypto trading might seem confusing and sometimes, exciting. However, the key to staying afloat in the market is keeping a keen eye out for these common mistakes of new crypto traders and avoiding them. The cryptocurrency industry is volatile as such it is easy to lose as well as gain in a short time. Stay informed always, set realistic goals and be patient. Welcome to crypto trading!

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