Here are 5 common Bitcoin investment mistakes, probably you are already made with cryptocurrency trading.
1. Failure in Mental Preparation
In trading, you may need to work on computers for long hours, where the key is concentration. You may be feeling fatigued and if you are not alert and in good spirits, it will affect your trading performance.
If you are not prepared to work for long hours on the computer and handle eye fatigue, all of this will affect your trading performance, and you will lose time and money. Also be prepared to treat trading like a profession for you, treat it as such – rigorously.
Make sure that you have the mental preparation to get started, and before you start, write down how you feel in a notebook. So when you having poor results, you can compare your daily mood and trading results with your notes on your “state of mind.”
2. Bad Risk Management
Risk management is very important to achieve consistent positive results. In spite of how many trades you make it makes you win. One bad trade will disturb your entire day’s activity. That is why risk management is important and you should always do any deal with a definite risk management plan. You must write down a risk/reward ratio when entering a trade.
Ideally, your potential trade reward in a cryptocurrency trade should always be twice the risk you take – it is called 2R.
3. Don’t Let Emotions Take Control
Sometimes you will just follow your emotions and act totally according to your emotions and you will not realize it until it is too late. Suddenly, you made a very bad trade. In this case, generally, there are two scenarios:
When you are doing bad trading and you want to improve, with the anxiety, you will do even worse deals. Or you made a good deal and you become confident and end up making bigger deals with overconfidence and losing money.
None of these two behaviors are correct.
What you must do is define your trading strategy and be consistent with it during your all trades. You probably already aware of the expression FOMO – Fear of Missing Out.
FOMO is also the fuse for many decisions in life. It doesn’t mean it is good because it looks good. I want to do the same trade because others are making money in it. The worst truth about joining any movement just because someone else is joining probably means that you already made the two mistakes on this list.
Don’t let your emotions take control over you – it will drag you to do trades that you probably don’t even interested in.
4. Stop Loss
When you do a trade you must be clear exactly why you are doing that trade and what you want to gain from it. In other words, you must be clear on when to enter a trade and when to exit, either to win and gain some money or not to lose more money by exiting from the deal at the right time using a stop loss.
Stop Loss is precisely useful for the second case where you want to exit from the deal at the right time. The next step is to be clear on how to set Stop Loss and results based on the stop loss. If your Stop Loss is hit multiple times, then there are two things that may be happening:
- Your goals for the trade is poorly defined and should be properly reviewed;
- You are constantly making bad trades, so you must set your trading volume lower until it goes back to green.
For several reasons Stop Loss is useful.
But the main one is to reduce your losses during the times when the market is in free fall.
5. Abuse Trading
Better don’t do everything at the same time! If you try to do everything at the same time, you will lose patience while trading and lose focus. With this, you will make more mistakes lose more money.