Here are a few common mistakes to avoid when trading cryptocurrencies;
1. Trading strategy
The first mistake in trading cryptocurrencies happens without a clearly defined plan. You need to know whether you will be playing a long game or a short one before starting any trade.
In the long run, buying and holding is just as profitable as day trading. Traders use a strategy called "dollar value averaging", in which they buy cryptocurrencies at regular intervals regardless of their current price. The average cost in dollars is a more profitable long-term investment strategy. This is due to the fact that there is no exact idea of where the diving bottom is, and it is unlikely that you will buy a diving bottom every time again and again.
2. Exit strategy
You need a reliable exit strategy as much as you need a trading strategy. You can withdraw your winnings every time or over time if you need to transfer your winnings to fiat money.
Immediate termination can lead to fear of loss (FOMO) as soon as prices rise. This may cause you to come back after cashing out every time.
Fix the profit at certain intervals when you can use the profit in dollars or percentages to measure.
3. Market depth
Not paying enough attention to the depth of the order book is another common mistake made by traders. This is mainly because most crypto traders do not know what it is, how to check it and why it is important in trading.
If you click on the depth tab of the trading terminal on the exchange, you will see the order book for this trading pair. This is a representation of buy and sell orders for this cryptocurrency pair on this exchange.
The graph on which the buying wave is larger than the selling wave indicates that the demand for the cryptocurrency in circulation is low. The sale of walls is a sign of the price at which many dealers will sell.
A depth chart where the buy order wave is much larger than the sell order wave usually means that logically there is a lot of demand for this cryptocurrency; the steps you see in the buy wave are called buy walls. They tend to identify support areas because many people have placed buy orders when the price drops to that level. Sometimes the strong support you see on the depth charts doesn't quite match what you see on the price chart, which can ruin your plan to buy on the decline.
If the depth charts are too arbitrary or chaotic, you can use the "Markets" tab on coinjeco to find out the depth of the order book for the cryptocurrency you need.
4. Trading volume
Traders completely lose sight of the trading volume. The cryptocurrency must have a sufficient trading volume relative to its market capitalization, and the trading volume must be high on more than one exchange. This applies to promising IRC-20 tokens that are traded exclusively on decentralized exchanges such as uniswap.
General rule of thumb: If you see cryptocurrency trading mainly on a decentralized exchange, be sure to pay extra due diligence to it during your research. Also, keep an eye out for any ridiculous trading volumes taking place on lesser-known exchanges.
Fake volumes can sometimes inflate the trading volume reported by CoinMarketCap and coinjeco.
5. Promotion of the offer
The generalization of the proposal can be easily checked in coinmarktcap. This is important because the low volume of the circulating offer compared to the total or maximum offer means that there may be a risk that you will be eliminated by the first investors or the team behind the project. That's why it's important to check the transfer schedules of coins or tokens intended for the team, early investors, consultants and any other parties who might start selling. The accrual schedules are given in the technical document of the project, documentation or detailed information about the initial coin offering (ICO) at ICO Drops.
6. Market value
The larger the market capitalization of a cryptocurrency, the more money it will take to raise the price.
If you want to withdraw funds 10 times faster, it's better to look for lesser-known altcoins. Altcoins on 5 or 6 pages of CoinMarketCap or coinjeco, as a rule, have a very low market capitalization, and this means that less capital is required to raise their prices. This also means that less capital is required to repay it.
7. Basics
Don't be one of those traders who invest in a project and expect its price to rise for no apparent reason.
Expectations are the number one crypto profit killer. The general expectation of any trader is when the price of cryptocurrency will start to rise. This may encourage you to open a position with borrowed funds without a stop loss and with a leverage of 100, which leads to a straight line.
Leverage tokens have limited downside risks and do not tempt you to increase leverage, which puts your capital at risk.
Unrealistic expectations come from other people, especially through the news. It's easy to believe any news, especially if famous people pay for it. Always do your homework, because not everything you see in the news is true.
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