The road to cryptocurrency trading riches is littered with potholes and missteps. Like any type of investing, there is an element of luck and timing that goes into crypto trading that cannot be ignored. Sometimes crypto traders fail because they don’t strike while the iron is hot, don’t get out while the getting is still good, or just don’t have lady luck on their side.
That said, there are plenty of preventable mistakes that crypto traders make as well. In fact, while some trades and traders are doomed by circumstance, it is much more common for a trader to fail because of a mistake that they make.
The good news is, when you know how many traders end up failing, you can learn from that information. The more you know the biggest crypto trading missteps, the less likely you will be to fall victim to them in your own trading experience. To help keep you on the right path and steer you toward crypto trading success, here are five mistakes that too many crypto traders make.
1. Not understanding your own risk tolerance
Trading cryptocurrency is not for the faint of heart. It is an incredibly volatile market which is why it makes millionaires seemingly overnight and can cost people their life’s savings as well. To be a successful crypto trader, you need to have a thorough understanding of your own risk tolerance. Too many investors get into trading without understanding this and it hurts them.
Taking aspects of your life into account–such as age and expendable income–will help you get a better handle on your risk tolerance. The younger you are and the more financially secure you are, the more you may be willing to risk when trading crypto. Other factors, like your financial goals, trading experience, and your stress levels associated with finances are things to consider as well.
If you know your risk tolerance and it is on the higher side, by all means, start trading. If it is on the lower end of the spectrum, you may want to bow out before you even get started. Either way, don’t start trading without knowing your risk tolerance.
2. Sticking to just one trading platform
There are a lot of ways to trade cryptocurrency. There are exchanges operating all around the world that give you access to the crypto market 24/7/365. A mistake that many investors make is that they don’t take advantage of these various options and only stick to one trading platform.
For example, maybe you’ve only traded on Coinbase but haven’t tried out any of the Coinbase alternatives available to crypto traders. This Cove Markets article has a good overview of some of the more prominent options out there. With different exchanges, you can find better fee structures, different cryptocurrencies to trade, and possibly a better overall experience.
3. Thinking it’s all about Bitcoin
In the world of crypto, there is Bitcoin and then there is everything else. The fact that all other cryptocurrencies fall into the category of altcoins, or, alternatives to Bitcoin, underscores this. But while Bitcoin is the original and most well-known crypto, it isn’t the only game in town by any means.
There is a whole exciting world of Bitcoin alternatives for investors to check out and many have just as much potential as the original crypto. There are around 5,000 varieties of crypto on the market today with more arriving (and some going away) all the time. While they are not all worth your time, many of them are.
Check out cryptocurrencies like Ethereum, Tether, Ripple, Litecoin, and more. Each of these cryptocurrencies is different from Bitcoin in its own unique way, and you may find that you are interested in investing in one or more of them. Also, most of these cryptocurrencies aren’t around $10,000 per coin like Bitcoin, making them easier to invest in as well.
4. Not setting both profit and loss goals
Not setting a stop loss for your crypto trades is a huge mistake. It can end up costing you your entire investment. That is how quickly the crypto market moves. This is a fairly obvious mistake, but one that many investors still make.
An even more common mistake that traders don’t often think of is setting profit goals as well. In a market as volatile as cryptocurrency, you want to take your profits when you can. If you don’t decide to take profits out at a certain point and instead try to ride a bullish wave as far as you can, you will often get killed when the crypto takes a sharp nosedive.
5. Not having the right crypto wallet
Keeping your crypto safe and secure as a trader is one of the biggest responsibilities. To do so, you need the right crypto wallet. There are several types of crypto wallets available and they offer differing amounts of accessibility and security.
Hardware wallets are the most secure but the least accessible. Desktop wallets are very safe but pin you to a physical location to trade. Mobile wallets are more accessible on the go but there are some safety concerns. Web wallets can be accessed from anywhere with a web browser, which is great for convenience. They can also be accessed from anywhere with a web browser, which is not great for security.
It is imperative you make the right choice for your needs while keeping security your highest priority. If you make the mistake of not using the right wallet, your crypto can be stolen and once it is, it is almost impossible to get back.
Traders who get into trouble investing in crypto often do so because of preventable mistakes. They don’t fully understand their risk tolerance, they stick to just one exchange or just to Bitcoin, they don’t set profit and loss goals, and they use the wrong crypto wallets. If you can avoid these mistakes, you will be much better off and will set yourself up for crypto trading success.