Among crypto enthusiasts, the BUY & HOLD approach is very common, i.e. they simply buy a cryptocurrency and hold it on their wallet. Many newcomers are attracted to the volatility of bitcoin and other cryptocurrencies, which can grow in price by 100% or more in just a few hours. And in the long run, cryptocurrencies can bring incredible profits. For example, if you invested in bitcoin at the beginning of 2013 and still kept it in a crypto wallet, by now the yield would exceed 7000%, meaning your portfolio would grow by 70 times. Sounds fascinating, doesn’t it?
However, as the number of investors and trade turnover increases, growth is not as fast as it used to be. In addition, the cryptocurrency does not always grow. There are long periods of correction when the price continues to fall rapidly. For example, by the end of 2018, bitcoin had fallen by more than 80% relative to the historical high in 2017. Therefore, some crypto enthusiasts prefer trading to investing, since you can make a profit on the waves of growth and fall of the bitcoin exchange rate. But, in fact, this approach is much more difficult and requires higher skills. The risks of losing money when trading are higher than when investing, because the number of transactions increases significantly, and a trader can make a lot of mistakes in crypto trading. In this simple guide, we will tell you how to start trading cryptocurrencies and what are the main mistakes beginners make when using crypto exchanges.
Trading carries high risk with it
We must first answer the question: why do some people lose money, while others win and make a profit? It’s just a matter of experience. Keep in mind that everyone makes mistakes, including professional traders. They just make them less often and know how to reduce the negative consequences of losing trades. When a trader first starts trading, he is ready to chase any trade that promises him a profit, like a donkey chases a carrot. This happens as follows: a novice sees how the crypto asset is growing and begins to buy it feverishly, without thinking about the likely risks. It often happens that after a little time there is a collapse, and the novice cryptotrader loses money. Also beginners tend to buy a large amount of a single asset relative to their deposit. This is another of the main beginners mistakes. Let’s look at the main mistakes made by beginners that lead to the drain of the deposit.
Common mistakes committed by novice crypto traders
The first error was described in the previous chapter. This phenomenon is also known as the FOMO effect (fear of lost opportunity). A novice, watching a growing asset, blindly follows the market, thinking that the cryptocurrency will continue to grow. Of course, it may be so – it all depends on the activity (or greed) of other buyers, as well as on the patience of sellers. But what is certain is that this will not last long. Especially if this is an artificially pumped growth, and not an increase in buyers caused by objective external factors. If you find that you succumbed to a momentary impulse and made such a risky deal, then put a stop loss to fix the level of losses that you are ready to incur in the event of a strong collapse of the cryptocurrency. The price may return to the previous level that was before the pump, or even lower, as a rapid fall can cause a panic wave of sales.
The next mistake is to follow your emotions. Trading is primarily analysis and cold calculation based on mathematical modeling, not a game of roulette. A crypto trader has to be able to abstract from emotions to predict events, exploring the laws of the market. This is a skill that is developed over the years. Therefore, the more time you devote to training, the more effective your trades will be, and the better you will control risks.
How to start
To start trading, you have to to create an account on the crypto exchange and a blockchain wallet to which you will withdraw profits or where you will store part of the funds for insurance. Then you need to learn the basics of risk management. There are a lot of courses on this topic on the Internet, and they are available in the public domain. You should know that there are multiple markets: spot, margin and futures. If you are a beginner, you should start with the spot market, which does not involve the use of leverage, since margin trading significantly increases the risk of losing money, especially for beginners.
Cryptocurrency trading differs from other types of trading since crypto assets can be traded not only against fiat but also against bitcoin or altcoins. Thus, the approach to trading will also differ. For example, if a trader seeks to increase the number of bitcoins on his account, and trades in pairs with BTC. Then it can use cryptocurrency for hedging, and convert altcoins to bitcoin in case of their correction.
When traders accumulate a sufficient amount on the balance of the crypto exchange, or in the case when they want to fix a part of the deposit in fiat after bitcoin growth wave, they exchange bitcoin for fiat currencies. The exchange rate on many crypto exchanges is different, so a trader can find a more profitable platform where you can sell bitcoin more expensive than on a trading platform.
One of these marketplaces is the HiRiBi exchange platform. Using the platform, you can exchange Bitcoin for PayPal USD at a high rate – higher than on most crypto exchanges. Such a high rate can be achieved on HiRiBi due to the fact that the platform regularly monitors several crypto exchanges, which allows you to offer sellers a more favorable rate. In addition, you do not have to pay additional fees when transferring from one exchange to another. The fee is already taken into account when the rate was calculated.
Through HiRiBi, you can sell bitcoin for 10% more than the average market value. The bonus amount depends on the current exchange rate on cryptocurrency exchanges. The service only supports the exchange of BTC for PayPal, and is one of the few platforms that works with this payment system.
We hope that you have figured out how to start getting acquainted with crypto trading and what mistakes should be avoided so as not to incur serious financial losses. Remember that the main goal of a trader is to buy low and sell high. Therefore, use any available tools that will effectively help you achieve this goal.
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