Trading in the cryptocurrency market could be difficult for beginners, especially for those who were inspired to enter the market due to FOMO. Before getting into trading in any market, it’s essential to do your research to understand its risks.
Many beginners enter the crypto market believing that the industry’s innate volatility would produce returns with minimal effort. However, they would soon realize that it’s also relatively easy to get burned. To understand how to trade in the crypto market profitably and securely, here are some mistakes that you could watch out for.
1. Trading with money you cannot afford to lose
While many people are looking for an easy way to become rich, many traders put in money they cannot afford to lose, which results in bigger problems than before the trade was executed. Due to the great opportunities that cryptocurrencies offer, many traders end up trading more money than they can afford to lose or even taking loans to invest in the market.
Indeed, it may seem like common sense to know not to borrow money from institutions or family to trade in the crypto market; some traders only the success stories they hear from people who have made it big with Bitcoin, Ether, and altcoins.
Although different traders have different levels of risk appetite, it’s important to trade only the money you are comfortable with losing while maintaining a proper risk management system.
2. Following emotions to make trading decisions
It’s normal to have the desire to follow trends in the crypto market, especially when everyone on Twitter starts raving about a certain altcoin. However, this could ultimately lead to FOMO or fear-of-missing-out on profits. In most cases, this could just be your emotions telling you to make a decision, which may not always lead to desirable outcomes.
Another common FOMO mentally is blindly following the herd and entering a trade after a coin has already seen a massive surge. Experienced traders will exit trades when necessary, and make their own decisions and follow through with their strategies. Greed is also a common emotion in trading, meaning that new traders could be missing out on exit positions.
By setting a strategy and ensuring that you will stick to it, automated crypto trading could be your good friend. An automated crypto trading platform would allow you to set your strategies, including your entry and exits, including at which prices you would like to take profit and take losses.
3. Not using a stop loss
While keeping your emotions in check may take some time to develop, a skill that every trader should possess is the ability to accept a loss and move on to the next trade.
By setting a stop-loss, you can set out how much you are willing to lose in a trade to ensure that you manage your risks even if the trade goes south. The cryptocurrency market remains volatile, and setting a stop-loss can prevent blowing up your account.
Setting a stop-loss on an exchange is not easy nor efficient since your capital is then locked in the stop-loss trade, unable to set take-profit orders. When you use an automated crypto trading system like CoinPanel, you can set your stop-losses and multiple exits, including take-profit orders as well. This allows you to have more flexibility with your time without worrying about price levels and manually entering the trade when the market is highly volatile.
4. Not keeping track of your profits and losses
Although most traders, even beginners, would check on their profits and losses frequently, it’s difficult to check your balance across different accounts, and especially when you trade on multiple exchanges.
There are different types of portfolio tracking apps out there that could help you track this, but then there is also the inconvenience of having so many different applications just to trade crypto.
There is a solution — an easier way to do everything on just one interface, and that’s CoinPanel. The all-in-one crypto trading platform — CoinPanel — allows you to trade cryptocurrencies on exchanges, set entry, take-profit, and stop-losses at the same time, and check your portfolio and positions all in the same platform. You can trade across different accounts as well on CoinPanel, allowing you to trade efficiently while tracking your profits and losses all in one place.
Always use a stop-loss when trading, as part of your risk management system. Understanding how much you are willing to risk in a trade is essential for executing your strategies. Cryptocurrency trading tools and platforms like CoinPanel could help with setting your strategies ahead of time, instead of manually entering them on the exchange, which also helps you to track your portfolio and positions. Happy trading!