Five Common Mistakes New Bitcoin Traders Should Make
The cryptocurrency market is volatile so traders can make extraordinary gains over short time frames. But, it is similarly possible to lose their investment in just days. Just like with all endeavors, traders can make mistakes when it comes to cryptocurrencies such as Bitcoin. These mistakes can include the following:
Using Too Much Market Indicators
As a new crypto trader, learning how to use different market indicators is usually the first step to take. But, you can easily get lost in the myriad of available indicators out there. Some of the most effective Bitcoin traders use very little technical analysis, usually depending only on the volume and price candles when making their trades. Spend a few hours watching the price action and get comfortable with it before you begin applying other indicators.
Trading Like There’s No Tomorrow
Especially when you are just starting trading, you may want to complete as many trades as you can. But, you only need a few trades per week to generate a healthy return. Overtrading will increase your losing streaks that may seriously damage your portfolio. Avoid setting yourself a goal for a fixed number of trades every day because this can result in making less-than-optimal decisions and compel you to take unnecessary risks. Bitcoin compass can help you trade properly and get good profits.
Not Following the General Asset Trend
More advanced traders can frequently profit while trading against the trend; however, beginners will usually have a difficult time doing the same. If the entire market is in a downtrend, this will make profitable trading opportunities fleeting. You should wait until you get the hang of it and recognize opportunities between peaks before you follow this practice.
Putting the Stop-Losses Too Close to the Initial Buying Price
The majority of cryptocurrency exchanges offer the stop-loss feature which is a significant tool you can use when trading to protect you against a heavy loss. But, you should not use a very tight stop-loss. A close stop loss can be triggered before the price can climb which can lead you losing out on an opportunity to profit from a huge climb. Make sure to acknowledge support/resistance lines when you set the stop-loss. These lines represent points that are not easy to break under normal conditions. Use a stop-loss for each significant trade as this can save you from an unexpected flash crash. And in case you lose money because of a bad beat, do not make rash decisions in an attempt to recover your losses quickly. You may end up losing more than what you are trying to recover.
Not Testing your Trading Strategy
When trading, your strategy is everything. Although it is usually easier to profit in a bull market, profiting in a bear market is more difficult and requires a solid set of rules. Before you follow a strategy, make sure you know how it works and how to apply it. Test your strategy before you apply it with real money. This will let help you better prepare for a lot of market events and may result in a better return on your investments over time.