Anyone can make significant returns from trading cryptocurrency, but it doesn’t take overnight. The reality is, being successful at crypto trading constitutes good timing, the right strategies, and a pinch of luck.
Keeping watch on the price fluctuations and doing market analysis significantly helps investors alleviate losses and boost profits. In a highly volatile market, these can properly guide crypto traders. Cryptocurrency, while an unstable industry, gives solid gains—but not to the extent that it will turn traders into millionaires in a couple of days.
Crypto trading can be rewarding and defeating at the same time. Make sure to do your homework before you get right into trading cryptocurrency online to save yourself some headaches and virtual coins. Check out this infographic that illustrates bad crypto trading examples. Let’s get started!
4 Examples of Bad Crypto Trading You Should Avoid
For your reading pleasure and benefit, here are some examples of terrible cryptocurrency trading moves that you should avoid, especially if you’re a newcomer in the game.
(While we’re at it, we published a related post about crypto trading mistakes. This post builds up on that by providing specific examples that you can learn from. Take notes, so you don’t make the same mistakes and succeed in the crypto playing field.)
1. Riding the “waves”
Riding the “waves” is a classic example of a pump-and-dump scheme. People buy trades quickly, thinking they’re doing a calculated gamble. But in reality, they’re falling into a snap decision fueled by FOMO (fear of missing out).
They ride on the hype thinking it would continue to go up, but it does the exact opposite. This is actually one of the cognitive biases you should bear in mind when forming crypto trading decisions. When traders see a bullish trend in the market, herd mentality kicks in instead of due diligence and better judgment.
Take this account from Crypto Bobby, which is a perfect example of riding the wave due to hype. He got an email announcement and saw SNT’s (Status) price starting to rocket and bought in thinking it would be the hot coin of the day that would make great profit. Turns out, it was a bad trade. Right after joining the hype, the price starts to drop dramatically, and it hasn’t experienced the same spike since.
The lesson: Don’t let emotions rule over your head. When you see a price going up, take some time to think about it instead of making a move within five minutes. Don’t ride a wave that isn’t a sure thing unless you’re okay with a huge loss because it’s a massive risk.
Some crypto traders, mostly beginners, aim to make as much crypto trades per day. Listen, that’s highly irresponsible and involves high-risk. This could be triggered by greed or revenge to recover losses. Regardless, the outcome is the same—you’ll only end up losing money.
When traders continue to do this, sooner or later, a lot of them will lose from fees or trading mistakes that crush them eventually. As you may know, you pay a fee each time you trade. A low fee can still eat up your profit margin if you trade frequently in a day.
Either they will trade more to balance their losses or dig deeper holes for themselves for making poor decisions. Take a look at this video from Crypto Oracle. He gives a good explanation of overtrading and how it can turn into huge losses.
The lesson: The reality is, there aren’t 10 or 20 great trading opportunities each day. Crypto Oracle advises that if there’s a limit on how often you can trade a day, it should be one. If you’re starting out, you must take it slow. You can’t make hundreds or thousands of dollars by trading a hundred times a day. That’s not how successful crypto trading works. In the end, it’s all about quality over quantity.
3. Letting go instead of HODL-ing
Remember the great crypto crash in December 2017? You’ve probably heard of HODL (hold on for dear life) as a crypto trading strategy before, right? Well, HODL-ing has never been more relevant and logical move in the cryptocurrency trading industry than during the great crypto crash.
Bitcoin is the pioneer of cryptocurrency, and when the crash happened, the best any trader could do was to HODL. As you can see, Bitcoin recovered. Those who HODL-ed and didn’t resort to panic selling made the right choice.
This video from Crypto Bobby talks about the Bitcoin crash and its terrible effect, especially for those who bought in right before the big dip. He expounded on why exactly traders should HODL (as the video’s title also says). In another bit, he also shared a personal experience of how his portfolio went down about 35% and recovered back in a couple of days.
The lesson: Before diving into trading crypto assets, you should know that the market rises and falls drastically. When crashes hit, don’t let fear or panic take over your decision; otherwise you’ll take huge losses. With HODL, you can choose to hold onto your crypto assets forever without selling a dime, or you could hold onto it long enough to take home long-term capital gains.
4. Exiting trades early
One of the biggest mistakes beginner crypto traders make is not committing and exiting trades early. As a new trader, it’s suggested to put your eggs in different baskets, especially if the coins you’re eyeing all have good standing and positive sentiments. But you should have a concrete plan and not act on impulse.
Even expert crypto traders today had commitment problems when they first started. Take this video from Crypto Oracle for example. He said that when he just started crypto trading, he wanted to get into different coins. And to do that, he would exit trades early to put into a new one, without making profit from the old one. Turns out, they were bad calls.
The lesson: Diversifying your portfolio is a smart move and has always been great advice. But committing to good trades (instead of exiting to enter a new one) is crucial to making huge returns. Don’t exit trades willy-nilly just because you see a new one. Let it earn profits, and then use some of those gains for new trades.
Crypto Trading Lessons for the Future
Mishaps in the crypto market can cost you big and can be hard to recover from. That’s why it helps to know from other people’s experiences to avoid doing the same. Doing your research and knowing the factors that make a good cryptocurrency exchange vs. a bad one is much like knowing which stocks are good to take or not. It’s also like choosing which banks to trust.
When starting out with crypto trading, you’ll find that it’s easy to make money, but also easy to lose. Take these examples of bad crypto trading moves and learn from them. When it comes to crypto trading, don’t get carried away with emotions and short-term results. If you do commit mistakes, it’s okay. But be sure to learn from them.
Do you know any other examples of bad crypto trading mistakes from your own experience or anyone you know? HODL on that thought and share it on our Telegram chat, our Facebook or Twitter accounts, to help other traders!