When it comes to crypto trading, there are a number of mistakes that all of us are making. Some mistakes are okay, as they don’t really affect our accounts or our emotions, others though can be horrible, so bad that they have a massive effect on pretty much everything that we do. Let’s take a look at some of the horrible mistakes that we see happening quite a lot and what we can do to try and avoid them in the future.
Trading the Same As Forex
Crypto trading looks very similar to regular forex trading, in fact, it uses the same trading platforms and the same charts, from the outside it looks pretty much the same. In reality, the way that it works is very different, but a lot of people fall into the trap of trading crypto the same way that they do with forex. There are some fundamental differences to them, firstly the amount of money being traded is a lot lower, so the markets are a lot more volatile, the markets are also not quite as open as you would think when it comes to crypto.
In the forex world, a single trader can’t make much of a difference, but when it comes to trading, a single trade can cause the markets to shift. The markets are controlled by the people rather than the markets controlling them, so the price is all based on what people want it to be. There are also much larger movements, both up and down, making it far riskier, so you need to ensure that you understand it before you trade. You cannot use the same tactics with crypto trading as you do with forex trading.
Trading Too Much
The trade sizes when it comes to crypto trading vary a lot, 1 lot does not always mean 1 coin. For some it does, things like bitcoin, a 1 lot trade may be trading 1 bitcoin, but if you trade XRP, 1 lot may mean 100 XRP, this can drastically affect your trading. You need to understand how much it is that you are going to be trading. Due to this, many crypto traders start out trading far too much. One major issue with placing trades that are too big is the volatility that comes with crypto trading. The markets are a lot more, so when you have a large trade, one that is too big for your account, as soon as the markets shift the wrong way and they can shift a lot, your account will be in trouble.
Not Watching the News
The crypto markets can be heavily influenced by news about the coin that you are trading or even a coin that you are not. Things like a big business taking up a currency into their service, or a country banning crypto can have a huge effect on the markets. You need to keep an eye on what is going on in the crypto world, if you do not, you may get caught out as you are treading a coin that has just been banned and the price will drop, but you won’t know that and you will only be greeted by the aftermath of a potentially blown account. There are a lot of sites out there that are quick to get the news up, use them regularly, even if it is just when you are on the toilet, as long as you are keeping up to date, you will be better protected from any sudden movements due to news events.
Not Using Risk Management
Risk Management is a key part of forex trading and it is also a key part of crypto trading, if you are trading without any form of risk management then you are asking for your account to blow. It is far riskier to trade crypto without a risk plan than it is forex too. The markets move so much that a single trade could very quickly blow and account if there aren’t things like stop losses in place, it is also vital that you understand how much you’re trading, as we mentioned above, different trade sizes mean different things depending on the coin that you are using. Risk management is key to keeping your account alive, yet so many people are convinced that a coin will go up that they trade without one, only to find the price drop and they lose quite a lot of money in the process. Always use risk management, no matter how sure you are of a trade, as nothing is guaranteed.
Trading With A Small Account Balance
One of the things that make trading so accessible is the fact that many brokers are now allowing you to trade with as little as $10. That is great but it does come with its own problems, if you want to trade successfully then you need a lot more money, in fact with some brokers a $10 account will allow you to place a single 0.01 lot trade on bitcoin, but as soon as the market moves down, even a few pips, the account will blow. You need a lot more to trade well on crypto than you do forex simply because the markets move a lot and the amount that you are trading is a lot higher, especially as you do not get as much leverage when it comes to crypto trading. So if you want to start, start with at least a few hundred, not the minimum that any broker will allow you to open an account with.
Putting All Your Eggs In One Basket
This is a phrase that you probably heard before, that you should not put all of your eggs into one basket. This basically means two things here, firstly that you should not put your entire balance into a single trade, and that you should not only trade single crypto coins. If we look at the latter, there are a lot of coins available, many of the crypto-focused brokers are now offering 30+ different crypto coins to trade, so there is a lot of variety. It is recommended that you do not trade only one, you need to diversify. Trading only one means that you are tied to its performance, if it is not doing well, neither will you, but if you diversify, even if one does not do well, others might, which will mean that you will negate any losses from the first coin. Try and trade more than one, but not too many for it to overwhelm you.
Those Are some of the horrible mistakes that we see a lot of crypto traders doing, the good thing is that most of them are very easily rectified by making a change to your trading plan or by simply changing your view of things. We all make mistakes when it comes to trading and we will continue to do so, what is important for us and the development of our trading is that we are able to recognise those mistakes and to learn from them, to adapt so that in the future we can do better and be a much more profitable trader overall.