10 Common Mistakes Beginner Traders Should Avoid
There are few restrictions on entering the cryptocurrency market. This means that anyone with an internet connection, through smartphones or computers and with little capital can theoretically enter the cryptocurrency market and become a trader. Unfortunately, most of these beginners learn hard and go bankrupt. Here are 10 common mistakes beginner traders should avoid:
1) Get started with real money
There is no reason for a beginner trader to use real money to enter the market and gain experience early on when there are resources to conduct simulated transactions. Someone who wants to become a professional trader must first be able to develop a system based on a set of simple instructions for entering, exiting and managing their capital risk. This management should not be done with real money. First, use platforms that simulate transactions.
2) Exchanges regardless of stop-loss
Beginner traders make their trades emotionally and it’s completely clear from their refusal to accept the losses. The most basic skill that a trader must possess is the ability to accept losses and move on to the next trade. Failure to do so is a major cause of loss for traders. Set yourself a loss limit and don’t change it when the market is against you, as this change will probably hurt you the most.
3) Lack of balance
Successful traders create a balanced portfolio of their funds and maintain that balance. For example, the author of this article states that only 10% of his capital is invested in the cryptocurrency market. 70% of this capital comes from the long-term investment, much of it dedicated to bitcoin maintenance. Another 15 percent of this capital is liquidity and 15 percent is for exchanges. He says:
“I only trade about 15% of my cryptocurrency capital. My investment in cryptocurrency accounts for only 10% of my total capital”.
Re-balancing is the process of returning to previous capital and allocating capital to the target asset based on the specified investment plan. Rebalancing is very difficult, as it may force you to sell good-performing assets and buy bad-performing assets. This is very difficult for beginner investors.
4) Become a loser trader
Investment and trade are different. Investors consider an average down based on investing in a perfectly healthy asset with a long-term horizon in mind. But traders determine the amount of risk and loss in the transaction. When they reach a loss, they end the transaction and must move on to another asset. Never, as a trader, go for an average down strategy.
Note: average down is an investment strategy in which a shareholder buys more shares after lowering their stock price. The result of the second purchase is the average decline in the stock price in which it has invested. For example, if an investor bought 100 shares for $50 per share if the share price was reduced to $40 and the investor bought another 100 shares, then the average price per share would reach $45. This strategy is usually adopted for long-term investment.
5) Failure to record events and transaction details
Successful traders work with the program. Part of the exchange with the program is to hold yourself accountable for your actions. The only way to do this is to record the details of the exchange. This is the best way to learn and avoid repeating mistakes in business. Make an office for this and visit it. Record the intellectual process, the state of the emotional exchanges, and the results of your exchanges. This will help you tremendously.
6) Higher Power Risk
In the cryptocurrency market, people get the idea of changing their lifestyle to make money if they are in the right place at the right time. As a result, they all invest in cryptocurrencies and risk putting everything into cryptocurrencies for which they are like lottery tickets.
7) Lack of capital
It is well known that money is needed to earn money. Many startup investors have come into the market with the promise of sitting on the couch and making money. This is a completely wrong idea and a false promise unless you already have significant investment funds.
A trader who wants to be a professional should be able to support his / her whole life by making transactions. This means that his profits from the transactions can make a living without having to invest his capital. In most parts of the world, the capital needs to be around $ 50 to $ 100,000 to make a 10% monthly profit.
It is very difficult to achieve this position. As a result, many beginner traders are under a lot of pressure when their transactions do not meet their expected returns and are met with reality.
8) Use the lever
Note: Leverage is the ratio of trader funds to broker credit. In other words, leverage is the borrowed capital to increase potential earnings.
Don’t do that. According to a well-known saying in the investment environment, leverage is like a double-edged sword, because it can both increase the returns on profitable transactions and can exacerbate the losses of a transaction. The lever tool should only be used by professional traders who have years of experience and profits. There is no faster and safer way to lose the capital except for the leverage.
9) practice of trading patterns and indicators that are not clearly understood
Beginner traders do terrible technical analysis. They often operate on patterns that do not exist on the chart or based on misinterpretations of the chart. Beginner traders should use a simple system for their trading and avoid making decisions based on patterns or indicators that they do not understand. Start by examining the levels of support and resistance or clear and understandable indicators such as the exponential moving average.
10) Acting like others
Another common mistake among beginner traders is that they blindly mimic the performance of others. In this way, they will eventually lose a great deal or lose because of the fomo created in one currency. Experienced traders tend to get out of their trade when it is too busy. Beginner traders may stay in their trading position for a long time even when they are at a loss. Traders may also act out of public confidence when necessary due to a lack of confidence.
As mentioned earlier, most beginner traders are blindly following people they don’t know on Twitter. That way they easily lose the hard-earned capital. Especially by people who are probably encouraging you to invest in an asset.
The last word
It is hard to trade. But if you make the right use of capital and take the basic steps to learn exchanges and risk management, you can be successful and experience profitable investment. The key is to have the right program. No matter what happens, act on your plan. If you tend to sell or buy a cryptocurrency and probably need to consult about it, you can contact ExPay 24 and our team of experts will help you with that.