Crypto is a market full of opportunities, but also many challenges, especially for those who are just starting to trade cryptocurrencies. And most mistakes come at the expense of significant losses. To avoid the above situation, we will introduce the don’ts when starting to play crypto!
1.No specific financial goals
Before you start trading, you have to ask yourself the question “Why do you want to trade crypto?. Are you just trading for fun or following the trend? Or simply a form of investment?” Whatever it is, you must set a goal before entering the cryptocurrency market. Specific goals will influence your trading planning, entry and exit timing or capital management through the profit/loss ratio at which you are willing to stop the order.
New players often don’t have specific goals, so they can lose money in the long run. Setting financial goals makes it easy for players to plan their transactions as well as have a reasonable investment orientation.
2. “Sink Or Swim”
The mentality of wanting to make a profit as quickly as possible often causes new players to “put all their eggs in one basket” and forget the most important principle of investment is preserving capital. Crypto is a highly volatile market that is susceptible to adverse events or news. If you invest all your capital in a coin, but unfortunately that coin is sold, scammed or hacked, all your capital will be “lost”. On the contrary, if you split your capital to invest in 10 different coins, if 1 coin loses and the other coins still grow well, you will still make a profit.
3. Do not save private key/keyphrase
A private key/keyphrase is a cryptographic string of characters used to encrypt and decrypt data, with a common application being to secure cryptocurrency wallets. Users need to use the private key to access the wallet in case of need.
There have been many heartbreaking stories of people who own a desirable amount of cryptocurrency, but cannot use it due to forgetting their private key/keyphrase. A good example is the story of Stefan Thomas. He is a programmer who owns a hard drive that stores 7,002 Bitcoins but has lost his private key. Therefore, Thomas cannot unlock and access the above Bitcoins. Calculated at ATH 68,789 USD, the amount of Bitcoin above is worth nearly 500 million USD.
4. Trade on unreputable Crypto exchanges
Due to the explosive growth of crypto, the cryptocurrency market has become a lucrative prey for scammers, whose main victims are newcomers to trading. According to the report, more than $7.7 billion was stolen in crypto scams in 2021. Exchange scams are one of the most common.
An experience for beginners in trading is to choose reputable exchanges. The major and reputable exchanges can be mentioned as Binance, Coinbase, FTX, KuCoin, …
5. Crypto trading by feeling
It is normal to follow market trends to find the right investment coins. However, new traders need to verify information carefully to avoid FOMO. “FOMO”, or Fear Of Missing Out, is a term that expresses the feeling of missing out on a profitable trading opportunity. This emotion often occurs when a coin is growing strongly but you don’t own it, leading new players to tend to sell all their assets to buy that coin. These transactions are often driven by emotions rather than reason, leading to after the FOMO wave, the coin will sell off and drop significantly in price.
Above are 5 common mistakes of newcomers to crypto trading. And of course, this is just the beginning. To achieve success and profit from the cryptocurrency market is a long road ahead. Hope you will make smart investment choices.