In recent years, trading bitcoin and cryptocurrencies has become quite widespread, so much so that many online brokers have included digital currencies among the available assets on which to trade.
Many users have been interested in the phenomenon. Others have seen both long (up) and short (down) opportunities, still others have made significant mistakes and have lost a lot of money. For a successful trade, you have to choose the right tools and platforms. Exchange tools might prove to be essential in this case.
Do click here for one of the best tools to convert Satoshi to Bitcoin, USD, and other currencies. Despite all the fuss in cryptocurrency trading, you can make several costly mistakes if not careful. Here are some classic mistakes traders make when trading bitcoin and other cryptocurrencies, such as Ethereum, Ripple, Bitcoin Cash, Litecoin, and so on.
Investing Too Much Money
The size of investments in cryptocurrencies is as important as it is on any other asset. Investing in bitcoin or cryptocurrencies is not necessarily a mistake. Some think it is an interesting market. For those who do not, it is only a matter of deciding which side to take.
Instead, what is a mistake, but this happens for any market, is to invest too much money compared to the available capital. You shouldn’t invest more than 5% of your capital, and you should keep in mind that you could lose that money.
For this reason, you should only invest the money that you are willing to lose, that is, that does not affect your daily life. You absolutely must not invest in cryptocurrencies, bitcoin, and any other asset necessary to pay rent, mortgage, shopping, bills, and so on.
It is not a mistake to invest only a small amount, and you do not have to eat your hands if the intuition turns out to be correct, but having invested little, you did not earn much. The price direction of the cryptocurrency could also have been opposite, and that money could have been lost.
Setting Unlikely Goals
The price of bitcoin and cryptocurrency has had some ups and downs considerably, but that does not mean that this can happen again. If today the value of the market of BTC totaled $ 6,500 does not necessarily mean that it can return quickly to $20,000. It is possible that that price may not reach it anymore.
The same goes for those who intend to open a short position in the hope that the price of Bitcoin will return to $1,000. Here, too, the price does not necessarily fall so much, and it may never return to such low levels again.
When you do your money management, it is good to think about possible goals and not unlikely ones. Your target may not be that difficult to reach, but it might be a good idea to aim for a measured but possible gain, especially if you are a beginner. In this sense, it is therefore good to set a stop loss and a take profit that is definitely possible and not so far from the starting price.
Give yourself a goal, which often could be 30% of the invested amount (especially if you work with CFDs ), and monetize your operation. In the crypto market, it is very easy to think big because of their price volatility, but it is essential to stay down to earth.
Not Paying Attention to Technical Analysis
Cryptocurrencies are financial assets just like the others, although they have characteristics quite unique. They must be treated like all other financial assets and must be studied both from the point of view of fundamental analysis and technical or graphic analysis.
While the stock market and Forex need a thorough study of fundamental analysis (plus the first of the second, to clarify), cryptocurrencies and bitcoin mainly need the study of technical analysis.
The latter in the crypto market is very important and should not be neglected. A common mistake is buying bitcoin or other digital currencies to hope to make money with cryptocurrencies without considering the chart.
It is very important to choose the right moment to enter the market and not “by hearsay.” Learn to see charts, indicators, and oscillators. If you are not prepared in this field, taking a dedicated course or a webinar would be advisable.
Thanks to interactive courses or video lessons, you can learn to understand the price trend of an asset such as Bitcoin.
Not Paying Attention to Duration of the Open Position
The duration of the open position is very important, especially if you work with CFDs, since you have to pay overnight financing depending on the size of the investment made. Holding a CFD position on cryptocurrencies open for a very long time leads to excessive spending.
This point is mainly linked to number 2, the one relating to unlikely goals. Having targets that are too difficult to achieve leads the trader to hold an open position for a long time in the hope of hitting the goal or returning to parity if the direction taken by the price of the cryptocurrency is not the one hoped for.
With CFDs, it is always good to make investments with a not excessive time duration due to overnight spending, which could slowly waste the capital. This cost is very low, but it could become expensive if multiplied by tens of days, if not hundreds.
On the other hand, if you operate without CFDs, you will not encounter this problem since you will not have to incur any expenses.
Not Using Regulated Brokers
The last mistake you could make, but not the least, is to operate with brokers that are not regulated by any supervisory authority. You should trade with licensed brokers who have obtained the necessary licenses to offer trading services to their clients.
Given the success of trading on cryptocurrency (long or short it may be), many brokers have decided to add this market on their own platform trading. It is extremely important to invest your money only in financial intermediaries who have obtained the ok from the supervisory authorities and therefore have greater transparency.