Cryptocurrency trading is the way through which users or investors can generate more profits and they can do big blunders while chasing quick success. At the earliest stage of the trading, if you know where you can go wrong and what you need to do once you have done wrong, then you will be successful to keep yourself on the right track for a long time and generate more profits over the period of time simultaneously. However, learning from the cryptocurrency trading blunders will give you the opportunity to build problem-solving or critical thinking skills and give you confidence or self-assurance in almost all aspects of cryptocurrency trading.
Mentioned below are 10 cryptocurrency trading blunders you must read and learn from in order to earn profits from trading in the long run:
1. Goes With The Wrong Exchange
Most novice users or investors are in the gloom on how to choose the right cryptocurrency exchange or start buying, selling and exchanging cryptocurrency on the exchange. If you go with the wrong cryptocurrency exchange, then you may run out of profit. But when you know your needs and requirements, then you will choose the right exchange for yourself. Before choosing an exchange, it is also important to know the basic information such as About company, Supported fiat currencies, Supported cryptocurrencies, Currency pairs, Supported countries, Payment options, Fees, Services or Products, Features, Security, Reputation, GUI and ease of use.
2. Trading Emotionally
It is a bad idea to trade cryptocurrency emotionally because emotions can trigger different feelings that might affect the resulting outcome. If you are trading cryptocurrency just because of jealousy, then you are probably to lose out all the opportunities in front of you. You can do nothing with someone else’s success, but you can learn from them. Plus, if you are finding yourself in a terrible place while trading in cryptocurrency, then applying the psychological aspect will lead to greater stability. Thus, controlling or managing your emotions during the challenges will resolve a pilot error and generate profits in the remote future.
3. Not Double-checking The Recipient Address
If you are not checking the wallet address of the recipient properly, then you are likely to do two mistakes viz., sending to an invalid address and sending to an incorrect address. An invalid address means the address which does not exist and an incorrect address means the address which does exist but you don’t know who is the recipient. In order to avoid the chance of making an error, you must copy paste the address instead of typing. Once you are done with copy-pasting, you must check the address twice before tapping on the ‘send’ button, otherwise, you will lose out your funds or won’t recover them.
4. Not keeping Hard Copies Of Everything
If your device gets crashed, then you will lose all your funds instantly. The worst part is that you won’t get them back. Therefore, it is always better to copy-paste all your passwords and private keys and take a printout of them. You must store them in a secure place. In this way, you will avoid any possible risk of contracting with a keylogger which is basically a technology designed to track and record consecutive key for malicious purpose. Try not to forget the place where you kept all your hard copies securely. Make sure to handle them properly in order to prevent them from stealing or tearing up.
5. Not Diversifying A Portfolio
The cryptocurrency market tends to fluctuate. In order to cope up with the difficult situation, you must diversify your portfolio. Diversification means putting your funds in multiple stocks in order to minimize risk. It simply means that you have to divide the risk around. If one stock doesn’t perform well, then other stocks may perform well and you won’t lose all your funds at once. Three things to consider while building a well-diversified portfolio are timing, distribution and coin choice. The timing gives you the idea of what to do when the market is up or down. If the market is up, then you must sell; and if it is down, then you must buy. The distribution gives the idea of a particular amount of funds to invest in each coin. The coin choice gives you the idea of which coin to buy and the choice must depend on the history, the current market value and the market prediction of the coin.
6. Not Protecting An Account With 2FA
If you don’t protect your accounts properly, then you will suffer severe financial loss due to cybersecurity breach. One of the ways to solve this problem is to secure your sensitive information with 2-factor authentication (2FA). 2FA is an additional layer of security which confirms the identity claimed by a user. The confirmation process combines two different factors such as Knowledge (something that the user knows) and Possession (something that the user has). For example, if you are doing an online payment, you will have to provide the vendor with your Card Verification Value (CVV) number and credit/debit cards number (something that you have) and a system generated OTP (something that you know) which is valid only for a few minutes.
7. Believing Rumors
Most people get manipulated easily with fake news and rumors/misinterpreted information as they work as influencers which shape the cryptocurrency market to a great extent. There is a lot of cryptocurrencies designed with the state-of-the-art technology and supported by well-organized development teams. But they can lose their value within seconds if they are denoted as scams. Prices can be accidentally pumped up due to misinformation. It is always better to do well research in order to have the actual information related to anything in the market before believing or dealing with any other third party.
8. Storing Funds Only In An Online Wallet
Most new users or investors keep their funds in an online wallet. If they lose their cryptographic keys, then they will lose all their funds forever as the keys are the way to prove ownership of the funds. Online wallets are also prone to hacks. Therefore, storing funds only in an online wallet can be a great risk. In order to keep, preserve, protect and secure your funds, you must move your funds into an offline wallet. Some of the offline wallets are hardware wallets (Ledger Nano S and Trezor), mobile wallet (Mycelium), desktop wallet (Exodus and Armory) and Paper wallets. Hardware wallets store the private keys of a user in a secure hardware device. You can access mobile wallets anywhere, at any time. Desktop wallets are computer programs which store your funds locally on your computer. The user will have the full control over their funds without depending upon any other third party. Paper wallets are basically a printed paper which contains public and private keys. You have to use them through a QR code. They are not connected to the internet and there is no chance of hacking.
9. Not Doubting The ICO
The beginning of 2018 saw the launch of 537 ICOs with a total volume of more than $13.7 billion. Whereas 2017 saw a total of 552 ICOs with a volume of just over $7.0 billion. More investors have invested in ICOs, but not all those coins have generated profits. It is also possible that a few hidden among those coins have generated tremendous profits. Make sure to invest only on those ICOs which will actually have future instead of running behind big names. In order to check a particular ICO, you must do research, read their white paper, join their Telegram group and check the background of the team. Moreover, you will come to know the actual use case of the ICO.
10. Being Uninformed
Make sure to stay up-to-date with the latest news related to cryptocurrency marketplace on a daily or monthly basis, otherwise, you will lose out many things and face difficulties to create the clear-cut picture of your next steps while trading in cryptocurrency. Twitter, Reddit and Telegram are great sources and you can use all three platforms to keep yourself up-to-date. Companies often use these platforms to share their project updates, new information and important announcements. The platforms will help you to gain more knowledge, and the courage to make the right decision for cryptocurrency trading will come from your knowledge bank.