7 Most Common Crypto Mistakes Beginners Make

Making mistakes while investing in cryptocurrency can have dire repercussions. It can completely destroy your portfolio and might even cause you to suffer huge losses. However, it is also good to know that making mistakes when it comes to investment is not uncommon. All of us have made mistakes at some point when pouring our money into cryptocurrency and if you are hoping to prevent yourself from making the same crypto mistakes over and over again, this article might be the perfect guide for you. Today, we are going to explore the common crypto mistakes that most investors are likely to make.

1. Investing Before DYOR (Doing Your Own Research)

Friends and relatives are the most common way for newcomers to learn about cryptocurrency. They are more likely to acquire coins based on the advice of others rather than conducting their own investigation into the currencies and projects. It's easy to fall prey to scammers and incur financial losses if you don't have a basic grasp of the network and currency. To prevent making crypto mistakes like this, be sure to do your homework. The goal of DYOR is to limit the number of misinformed cryptocurrency traders. It motivates individuals to do their homework before purchasing so that they can explain why they are acquiring it and backing that project.

2. Having No Plans Or Goals

The value of having a strategy or plan in crypto trading cannot be underestimated. Before you start investing, make sure you have a well-thought-out plan that includes the entry and exit points. Beginning crypto investing with no purpose in mind might cause your investments to go crazy and not be as cost-effective or rewarding as they could be. A well-thought-out objective can help you navigate the crypto world with caution. Before getting on the crypto bandwagon, you must have a defined goal in place. Fear of missing out (FOMO) or the urge to earn fast cash should not be driving factors.

3. Buying High, Selling Low

Many would want a cut of the pie when they notice a project's price soaring. You don't want to miss out on anything, so you dive right in. Yet, when you invest when a project is hot, you are more likely to lose money since early investors will take their gains. You will have to wait a long time to break even, let alone earn any profit. On the contrary, when a coin is plunging, it might be quite tempting to sell it. The problem is, that if the project is strong, there's a high possibility it will make a comeback. The last thing you need to do is sell at a loss just to see the coin skyrocket in value a few weeks or months later.

4. Not Diversifying Your Cryptocurrency Portfolio

To begin, diversification is a risk management approach in which a portfolio has a broad range of investments. Diversification safeguards against unanticipated and adverse market movements in the cryptocurrency space, which is extremely unpredictable. While it won't shield you against a market-wide downturn or a bearish trend, it will mitigate your risk if one of your investment portfolios has a bad run. If one cryptocurrency crashes and your investment plummets to zero, you might still be able to profit from other crypto investments. Without proper diversification, you are certainly exposing yourself to a higher level of risk.

5. Investing More Than What You Can Afford

It is not advisable to put your whole life savings into cryptocurrency investments. It's better to think of it as a form of gambling, so just spend a tiny portion of your discretionary income and expect yourself to lose everything. Never put more money into something than you can afford to lose. You should not put that much money in if you are not using trading strategies or adequate technical analysis. There's no doubt that successful cryptocurrency trades have made certain cryptocurrency investors millions. What isn't spoken about nearly as much as the large number of individuals who have lost a lot of money attempting to get rich by investing in cryptocurrency.

6. Using Margin Trading When You Are Still A Beginner

Margin trading is borrowing money from an exchange in order to trade. The advantage is that if you play your cards correctly, you will end up with a large profit. However, if your investments fail, you might lose a lot of money. Margin trading has a higher profit potential than standard trading, but it also comes with a higher level of risk. Investors that use margin risk losing more money than they put in. In addition, they must pay interest on the money they loaned, which increases their investment expenses. Do not get into margin trading unless you have mastered cryptocurrency trading. This is particularly true for newcomers.

7. Not Taking Profits

One of the most common crypto mistakes made by investors is failing to take profits. We become so happy when we watch our investment rise that we believe it will soar to the moon. We become resolved not to take any gains and then the price suddenly plummets. The market will not always continue going up and the only way to profit in the long run is to sell. If the price of your cryptocurrency has risen, for example, grab the majority of your winnings when they hit 20% to 25%. You can sell your entire investment if the market is going through turbulence and good profits are difficult to come by.

Always DYOR and Stay Informed

It is extremely normal to make these crypto mistakes when trading cryptocurrency. However, what’s important is that we learn from them and remind ourselves to not repeat the same mistakes again. If you are new to cryptocurrency and are trying to get into trading it then I believe that this guide will be all the more helpful to you.

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Disclaimer: This material is for information purposes only and does not constitute financial advice. Flipster makes no recommendations or guarantees in respect of any digital asset, product, or service. Trading digital assets and digital asset derivatives comes with significant risk of loss due to its high price volatility, and is not suitable for all investors.