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5 Biggest mistakes to avoid as a crypto beginner
Investing Basics
October 26, 2022

5 Biggest mistakes to avoid as a crypto beginner

Trading is as much an art as it is science, despite what chartists and technical analysts may claim. This is especially true for cryptocurrency trading, which occurs in a developing and often volatile market where values can change abruptly due to illiquidity, manipulative whales, and herd behavior influenced by social media.

Millions of new investors enter this market each year – and considering how unpredictable cryptocurrencies can be, it's not surprising that most of them lose money.

It also doesn’t help that the crypto industry is largely unregulated; many scammers are looking to take advantage of naïve investors. Due to their lack of knowledge, some inexperienced traders make avoidable mistakes that cost them money.

With these five tips, we want to help you avoid the most common mistakes novice cryptocurrency traders make while also increasing your chances of success. 

Key takeaways

  • Make sure to do your own research before making any investment decisions
  • Consider diversifying your portfolio to mitigate risk
  • Do not try to time the market; let the BOTS app help you with trading
  • Emotions have no place in trading, be as rational and objective as possible

Most common crypto beginner mistakes to avoid:

1. FOMO

The Fear Of Missing Out is a powerful psychological force that drives people to make impulsive decisions. In the context of cryptocurrency trading, FOMO leads investors to buy assets when prices are skyrocketing in the hope of not missing out on further gains.

This often leads to impulsive buying at the top of a market cycle and can result in sizable losses when prices inevitably correct themselves.

Finally, FOMO can also lead to crypto scams. Many investors have been duped into buying worthless tokens or participating in Ponzi schemes because they were afraid of missing out on the next big thing.

The best way to avoid FOMO is to take a long-term view of your investment strategy and focus on building a portfolio of quality assets rather than chasing short-term gains. You should also be mindful of the risks associated with investing in new and unproven projects.

2. Investing without doing your research

One of the most important things you can do before investing in any asset is to educate yourself about it. This is especially true for something as complex and volatile as cryptocurrency.

Even so, many new investors put their money into cryptocurrencies without learning anything about them first. This is a recipe for disaster. If you don't understand what you're investing in, you will likely make bad decisions and lose money. 

Before investing in anything, take the time to learn about the project, the team behind it, the market opportunity it's targeting, and the competition it faces. Only then should you decide whether or not it's worth investing in.

3. Failing to diversify your portfolio

Many new investors make the mistake of putting all their eggs in one basket. They might invest all their money in a single cryptocurrency or only trade a few coins.

This is risky because you could lose all your money if something happens to that asset. For example, if Bitcoin suddenly drops in value, you would be out of luck if that's the only cryptocurrency you invested in.

To mitigate this risk, you should diversify your portfolio by investing in various asset classes. This way, if one asset loses value, you have other assets to offset the loss.

Investing in a mix of established and up-and-coming investment options is also a good idea. Not only does this diversify your risk, but it also allows you to invest early in promising projects that could yield significant returns down the line.

Recommended: What is diversification? 

4. Trying to time the market

Attempting to time the market is a fool's errand. No human can consistently predict how prices will move in the short term, no matter how much experience they have or how good their track record is.

This doesn't stop people from trying, though. Many new investors think they can get an edge by timing their trades around news events or price swings.

They might buy when prices are low and then sell as soon as they've made a small profit. Or, they might wait for prices to reach a certain level before buying in.

This is often a losing strategy because prices can move in the opposite direction of what you expect, or they might not move at all. You could end up missing out on gains or selling too early and missing out on other profits.

How the BOTS app can help you:

This is something the BOTS app can help you with. We have over 300 trading bots that can do the trading for you. Our bots are trading algorithms that can carry out hundreds of intricate calculations in a matter of seconds, giving them the ability to make trade judgments. They are literally better traders than humans. Download the BOTS app if you don’t already have it, or check out how the BOTS app works so you can start trading smartly today! 

5. Relying on emotions

Emotions have no place in trading. Decisions should be based on facts and data, not how you feel about a particular asset.

Unfortunately, many new investors let their emotions guide their trading decisions. They might buy an asset because they're bullish or sell because they feel bearish.

Recommended: Bull vs. Bear Market Explained

They might also hold onto a losing position for too long because they're hoping prices will rebound or exit a profitable position too early out of fear of losing their gains.

Anytime you decide based on your emotions, you're increasing the risk of making a bad trade. You should always aim to be as rational and objective as possible when trading cryptocurrencies. This is also a reason for you to try the BOTS app! You can start investing from as low as €5. 

Whether you’re new to the cryptocurrency market or have been trading for a while, it is important to be aware of traders' mistakes. By avoiding these mistakes, you will grow as an investor, and you stand to make more gains. Remember that the tips we share aren’t equivalent to financial advice, so please do your research before investing in any asset.

 

Disclaimer:

This blog is for educational purposes only. The information we offer does not constitute investment advice. Please always do your own research before investing. Any views expressed in this blog and by BOTS do not constitute a recommendation that any particular cryptocurrency (or cryptocurrency token/asset/index), portfolio of cryptocurrencies, transaction, or investment strategy is suitable for any specific person.

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