The crypto market is booming and provides many lucrative opportunities. According to some estimates, the US crypto market will have a valuation of $32.9 billion by 2028.
This massive growth is luring many people who want to start their trading journey to the market. However, it is essential to understand that beginners are prone to making mistakes. These basic mistakes can cause them to incur significant losses in the short and long term. So, to help you, this article will discuss the seven mistakes beginner crypto traders make and how to avoid them.
Starting Your Journey in Crypto Trading
There are things that you try for the first time, and crypto trading is no exception. Since you’re entering the market and making trades for the first time, you will make mistakes. Nevertheless, you can avoid the following seven mistakes to ensure you can start your trading journey in a streamlined manner.
- Choosing the Wrong Online Brokerage Firm
Firstly, finding the right online trading platform is imperative. It is considered to be the make-or-break point of your trading journey. You’ll have difficulty understanding the market dynamics if the online broker lacks the necessary training tools and resources.
On the other hand, the right online broker will provide you with features such as educational resources or demo accounts to help you get started. They will also offer a user-friendly trading dashboard to carry out trading easily. Therefore, you should research a crypto trading firm extensively before choosing it.
- Not Knowing About Taxes and Fees
Another mistake that beginner traders make is not knowing about taxes. Keep in mind that simply buying/selling crypto isn’t taxable. However, when profiting from your crypto trading efforts, you must deal with tax implications. Besides that, you also have to deal with the fees that come with crypto trading, such as blockchain fees, exchange fees, etc. Again, choosing the right online brokerage firm is vital since they’ll provide you with a clear idea of these charges.
- Becoming a Part of The Herding Effect
One of the biggest mistakes that beginner traders make is becoming a victim of the herding effect. While this term is common for stock traders, it can also be used for crypto traders. Herding effect refers to following one another, just like a herd does.
In the case of crypto trading, the herding effect refers to investing in a crypto coin that is seeing a rapid increase. Traders invest their money in a particular coin without assessing the factors behind the increase in price. As a result, they can also become a victim of pump-and-dump scams. Getting assistance from a crypto fraud lawyer is best if you have become a victim of any such scam.
- Making Decisions Based on Speculations
Just like the herding effect, many beginner traders make the mistake of not conducting technical and fundamental analysis. They believe their gut feeling or speculation regarding a particular crypto coin to determine an increase in the price.
However, this will probably turn out to be a wrong decision since they didn’t understand the market dynamics. Learning about using charting instruments and analytical tools is vital for smart decision-making when trading crypto coins.
- Investing in a Single Asset
Crypto trading is quite risky, with prices seeing massive changes in a short time. This volatility provides opportunities for traders to make quick profits. Beginner traders make a mistake at this point, where they believe they’ll continue to make similar levels of profits in the long run.
They don’t diversify their portfolios and incur massive losses when crypto coin prices significantly decrease. To avoid this situation, channeling your profits towards other assets is essential. Portfolio diversification can mitigate the impact of substantial price movements in the crypto market.
- Failing to Analyze the Situation
As previously stated, the crypto market is quite volatile. Any geopolitical or economic policy changes can lead to significant price movements. A beginner trader might not heed relevant news and updates. This could lead to significant losses and massive devaluation of your crypto holdings. The best way to avoid this issue is to stay updated with the changing market situation and make the right decisions accordingly.
- Forgetting Crypto Wallet Password
When trading cryptocurrency, a secure crypto wallet becomes your essential companion. These wallets, accessed through passwords or private keys, hold your digital assets. However, losing access to your crypto wallet can be a costly mistake. Forgetting your password can result in lost funds, as most services can’t recover them. That is why traders should keep it safe. Many wallets offer a backup seed phrase. These are a series of words that act like a master key. Write it down, store it securely, and never share it, as this phrase is crucial for regaining access if you lose your password or private key.
Final Words
Starting your journey in the crypto world can lead to profits in the long run. However, as a beginner trader, you need to be aware of these mistakes. This way, it won’t impact your morale and ensure you continue trading without any issues.
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