Trading with cryptocurrency provides significant opportunities for investment and making good money because of the increasing potential of using digital currency. However, undertaking the trading and exchanges in cryptocurrency comes at substantial risk because of increased scamming, and the enormous mountains of trading with cryptocurrencies can be pretty overwhelming. Therefore, five deadly mistakes can be costly when trading with digital currencies and make transactions with digital currencies a nightmare.
Don’t be trapped by the hype.
Beginners in online trading should avoid getting caught up in the hype. The experiences in trading with cryptocurrency should begin only after understanding the core aspects of the trade that make it unique. The hype has seen many novice traders jump on the bandwagon but leave because of significant losses from bad experiences in the transaction. Since the introduction of digital currencies, the most significant gains were experienced in 2017 after the sharp gains of capitalization estimated at a 3,300% increase during the year. The progress continued throughout 2018, which saw great hype about using digital currencies as a significant cause of rising asset values. The prices fluctuated in different instances in 2018, which led to substantial losses for those who started using digital currencies while it was almost at the top. To avoid the mistake, traders should perform thorough research to ensure they understand the basics of exchange and the facts, which also should include an investment plan which is not driven by hype or emotions.
Avoid being swayed by FUD
In digital currencies, FUD means Fear, Uncertainty, and doubt. The latter introduces the criticism of using digital currency while advocates of using the currencies exist. Example of comments by Warren Buffer that bitcoin is not an investment but exists as a currency where one hopes the next guy pays more can significantly impact crypto markets. To avoid being swayed by FUD, traders need to develop trading strategies that are followed to the letter and can survive even in a less-than-optimistic commentary.
Avoid risky exchanges
There is increased research and participation in trading with digital currency, and incidences of hacking and spamming are common. Hacking is the leading contributor to losing money, with Mt. Gox and Bitfinex being the top examples of how a trader can lose money by getting hacked. To avoid being hacked victims, traders should research and find exchanges with a strong reputation and withstood the test of time. Using tested platforms for digital currency trading like bitcoin traders is also essential, which can make all the differences in the trading and exchange.
Avoid being a victim of FOMO.
The high volatility in digital currency can be affected by different aspects like price changes. Still, prominent players with significant investments can impact the price fluctuations since individual digital assets can be low. A high trend in markets and the price of digital traders can be tempting, and investors can be tempted to join in the trade because of the phenomenon referred to as ‘Fear of Missing Out. There have been noticeable price fluctuations, but the sharp plunges make it easier to have a terrible trading experience, especially for those who buy when the digital currencies trade at their highest. Therefore, avoiding being a victim of FOMO is essential for all traders. It requires coming up with a long-term plan and sticking to it regardless of price changes.
Avoid selling based on emotion.
After establishing an entry position, traders should identify the exit positions based on the strategies. Selling on emotion can be costly because the high volatility of digital currencies can be tempting to use emotions when trading—the latter calls for evaluating the value of assets before selling a digital token. One aspect of trading is that losing the value of a digital currency does not change its fundamentals.