No matter the kind of financial market, you are always at risk of committing mistakes. Investors both seasoned and novices commit mistakes and such events are very natural. After all, we’re just humans. The same thing goes for cryptocurrency investing.
When you’re trading, it’s okay to commit mistakes. That being said, these things should not just be swept under the rug. Rather, they should be acknowledged, fixed, and avoided, lest you want to make the same mistakes all over again.
In this article, we list down the most common cryptocurrency investing mistakes that beginners and experienced traders commit. You should know what they are so you can effectively avoid committing them in the future. Read on!
Personifying the Market
The victims of the dotcom bubble would talk a lot about the “smart money,” which is something one group does to another group to milk some money out of them. Nowadays, in the cryptocurrency landscape, this kind of thinking is also rampant among investors.
However, markets are not generally political. The markets are predominantly economic. In other words, you don’t have to think about people but you have to focus on things and mechanisms.
A person, no matter how popular or influential he is, cannot make the cryptocurrency market crash within a few sentences or statements. A market might move a bit if a colossus of finance talks but the price discovery of big markets like the crypto space needs tremendous amounts of intervention to sway for more than seconds.
Financial markets are huge stochastic processes and it takes truly historic events to change or make the trends.
Do not go for broke
During the dotcom era people made millions stacking up risks on risks as the market continued to boom—and then it popped. When the bubble burst, these same people lost everything.
You must always aim to spread your risk even or especially when things are going too great. Keeping all your money on the table and piling it up on each play will eventually break your pile of wealth.
Investing should not be a gambling game. If you go for broke with investing in an asset or two, you are almost sure to lose everything. Never forget that diversification is the one of the most important rules of investing and it should never be foregone.
It’s game of skill not chance
Investing and trading requires high levels of skills. You need the best equipment, execution, and tools. When the market is only going up almost anyone can make some money. But that usually doesn’t last long. Take out the optimism and what’s left is a market that requires skill, focus, and discipline.
Don’t follow the Herd
If you think you have to get into something just because everyone around you is earning stacks of cash from it, lose your shirt. What usually happens when you fear missing out is you jump in while the bubble is at its peak, make some money for a couple days, and then poof, all’s gone.