Cryptocurrency has become popular among private investors over the last couple of years. This is partly because of the high returns and the volatility which is a playground for investors with an appetite for risks. Since cryptocurrency is a risky investment, extra caution will need to be taken. You will need to do thorough research before you decide to invest in any digital currency. You can check out the Website of Harry Miller if you’re looking to gain a deeper understanding and a new perspective that is not often shared. Here are some of the mistakes you should be avoiding when trading cryptocurrency.
Investing in What You Don’t Understand
This is a mistake that people make not just with cryptocurrency trading but also other types of investment. It will be hard to make a profit investing in something that you don’t understand, especially if you’re doing it on your own. That is why it is important that you start by learning about the coin you intend to invest in. It is only after knowing about a particular coin can you make an informed decision. You will be in a better position to analyze market forces that influence prices. Evaluating cryptocurrency is another challenge altogether which requires a special set of skills.
Following the Wrong People
There is a lot of information on cryptocurrency on the internet and it is easy to be carried away by the hype. There are some groups that are known for pump and dump. You might make huge profits but you stand to lose everything just because of greed. The internet is full of trading “advice” and it will be difficult to separate the grain from the chaff. If you have to follow the advice of someone, you should at least make sure they’re an expert in their field with a successful track record to back up their claim. This could also be difficult to establish.
It will be very risky to put all your eggs in one basket. As an investor, you need to have a diversified portfolio and investing in cryptocurrency is no exception. There are so many digital assets other than bitcoin that you could put your money on. When you diversify, you minimize the risks of having to lose everything which is a possibility given the volatility of the cryptocurrency market.
Finding the “Next Bitcoin”
No one saw the growth of bitcoin in the last two years. Early investors become millionaires overnight. Although something like that can happen, the chances are minimal. You should stop wasting time looking for the next bitcoin. There are more than 1500 digital currencies at present and you will be setting yourself up for failure if you’re looking for the next bitcoin. Instead, you should be focusing on how to take advantage of the opportunities that are currently available.
Having No Plan
As they say, failure to plan is planning to fail. Most beginners will fail because they don’t have a clear investment plan. You will first need to determine how much you’re willing to set aside for cryptocurrency investment. If you’re just starting out, you shouldn’t be putting in a lot of money. You need to start small so that you can grow confidence. You should also have a profit target and a stop loss so that you don’t run down the investment accounts. You should not be waiting when the coin has hit the set target. There is nothing wrong with taking profit.
Failure to Store Your Coins Securely
The crypto world is full of scammers and hackers. They will always be looking for opportunities to fleece you. It is imperative that you’re storing your coins securely. Having an offline backup is recommended. The two most secure ways of storing your cryptocurrency in paper wallets or in a hardware wallet.
Forgetting About Taxes
It is easy to forget about taxes when you’re trading crypto. Just like any other form of investment, crypto is also subject to taxes. The taxing will vary from one jurisdiction to another. You just have to make sure you’re doing everything via the proper channels to avoid problems with the law.
Investing More that You can Afford to Lose
You should never invest more than what you can afford to lose. Don’t put a lot of money on cryptocurrency trading when you’re just starting out. You will need to test whether or not it is the right investment for you. This could take some time.
More on this topic: Cryptocurrency: A New Investment Opportunity?