A lot of people want to trade via cryptocurrencies because there is a big hype on different cryptocurrencies; people get the chance of making investments, playing games, and buying digital artwork with the help of cryptocurrencies. Because of the benefits of cryptocurrencies, some people consider trading cryptocurrencies, but some mistakes can be made by the people. Although beginner crypto traders can make common mistakes, knowledgeable traders can also fall into these mistakes. Hence, the common mistakes should be learned for avoiding wrong trading in cryptocurrencies. Now, it is time to explain the common mistakes in trading cryptocurrencies!
Making a lot of trades
The first common mistake in trading cryptocurrencies is making too many trades. The mistake is generally derived from the ideas on social media platforms. New crypto traders are always reading ideas and comments about cryptocurrencies on social media platforms, and then, take action according to the written things on social media.
Some crypto traders hold one cryptocurrency and sell it for another token. Then, they sell the second one for the third one, and they continue the process. They think that the process can reward them with money, but this is not how the circumstance goes. Because of the process, the traders pay more exchange fees for each transaction, and this situation explains that making a lot of trades causes a big failure in cryptocurrency.
For avoiding the common mistake, you can conduct research into the strongest cryptocurrencies and evaluate them for your trading. Also, you should not sink into every written thing about cryptocurrencies and trading on social media.
FOMO stands for fear of missing out, and the emotional response can be encountered in every person’s daily life. Due to FOMO, a lot of people think that important opportunities are missed, so other people will live better. The emotional situation affects people both psychologically and physically, and it generally appears with the use of social media.
Like in daily life, FOMO can show itself in trading crypto. As you know, a lot of people can gather together behind a particular cryptocurrency, and other people realize the situation. After realizing this, these people are scared, and they think that the crypto is very valuable because there are too many people behind it, so s/he should not miss it. However, the thought is not true because we cannot say that a crypto will bring in just because there are too many investors behind it.
According to a 2021 survey of NORC at the University of Chicago, one of the largest independent social research organizations in the United States, 24% of crypto traders get information about cryptocurrencies from social media while 26% of the traders receive information through crypto exchanges. Also, 25% of the traders use cryptocurrency trading platforms, such as Robinhood and Fidelity, for getting information. As we mentioned above, FOMO generally starts with social media, and 24% of crypto traders utilize social media for reaching information about cryptocurrencies. Also, we know that a lot of people are found in Discord and Telegram which belong to a specific cryptocurrency community, and the written things on these platforms can affect beginner crypto traders. Hence, we can say that crypto traders who use social media to get information about trading cryptocurrency meet with FOMO due to the use of social media.
Investing in cheap cryptocurrency
Generally, beginner crypto traders think that they should buy cheap cryptocurrencies because the cryptocurrencies will increase in value. At first blush, the thought can be right, but the exact situation is not like that. In other words, the cheap cryptocurrencies can show decreasing, so sometimes HODL strategy cannot work efficiently with some cheap cryptocurrencies.
For not doing the common mistake, every person should focus on the market cap, instead of the price of the cryptocurrency. In addition, people can seek answers to the questions that are why the cryptocurrency is so cheap and what are the future plans to guarantee a rise in the price of the crypto.
As you know, the crypto market is very changeable, so the circumstance can affect crypto traders’ attitudes. Generally, new traders feel panicked when they encounter instantaneous price drops in the crypto market. Then, they sell their cryptocurrencies because of the drops, and the situation is called panic selling.
We want to emphasize that many cryptocurrencies can increase in price in a couple of days, so waiting for a rise in prices can be a logical choice, instead of selling everything because of a price drop.
Considering one cryptocurrency
There is a sentence: ‘’Do not put all your eggs in one basket.’’, and the sentence can explain the common mistake in trading crypto concretely.
Every crypto trader can focus on only one cryptocurrency, and the circumstance is wrong in trading. In other words, the future of cryptocurrencies is unpredictable, so traders should not rely on only one cryptocurrency; the most promising cryptocurrencies can show significant downfall, so every cryptocurrency is not guaranteed to survive in long term. Hence, traders should not invest all their capitals in one cryptocurrency, and they should consider different cryptocurrencies for trading.
To summarize, there are some common mistakes in trading cryptocurrencies, and the mistakes can be done by every person, not only new crypto traders. Because of the situation, every person in the field should consider the mistakes and do their own research about cryptocurrencies. In other words, people should not rely on social media, and they should conduct research into various cryptocurrencies and their future situations before trading.