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7 mistakes to avoid when trading crypto in 2023

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The media is awash with reports of people making huge amounts of money trading cryptocurrencies and NFTs but the reality about crypto trading is that it comes with risks. The volatility in the crypto market causes the prices of cryptocurrencies to change suddenly or near suddenly due to market manipulation or herd behavior influenced by social media, making it a fertile ground for mistakes. Each year, a large number of new investors (both retail and institutional) come into this market, and given how unpredictable cryptocurrencies can be, it is not unexpected that the majority of them end up losing money.

Many people make simple mistakes with investing decisions and end up losing their money. The start of a new year signifies a new beginning for a lot of people and the mistakes of the previous years should be avoided. This article outline mistakes to avoid as you trade crypto in 2023.

  1. Not taking the time to learn

This is a serious mistake every crypto trader should not make. Many new people get into crypto with a get-rich-quick mentality because of what they see online or how their friends make it big in crypto trading. Crypto is not a get-rich-quick scheme. Learning to be a profitable and consistent trader can take months and even years. Depending on how quickly you learn. Take time to invest in trading education, understand the fundamentals, read charts, practice with demo accounts, and learning indicators. This way, you can limit your losses when you start trading.

2. Failing to secure trading accounts

Failing to keep your account safe most of the time causes a loss of funds and tokens, which is irreversible.

Use centralized exchanges that are regulatory compliant and have KYC.

How to secure your account

  • Making use of a strong password that you frequently change. The password shouldn’t include your date of birth or any other personally identifying information. Make sure it is lengthy, particular to that account, and comprises symbols, numerals, lowercase letters, and uppercase letters.
  • Activate Two-Factor Authentication (2FA). A second layer of security is provided if your password is compromised via 2FA using a mobile device or authenticator software.
  • Be on the lookout for emails, social media, and private message phishing scams. Fraudsters usually pretend to be exchanges and reliable people to steal your money. Additionally, avoid downloading software from untrusted sources, as it can be infected with malware. We’ve written about scams and hacks here.

3. Being Impatient

Patience, they say, is a virtue, so also it applies to crypto trading. A lack of patience can cause serious losses to traders. New traders want to trade quickly and make a lot of money, because of this, they trade and are constantly online to take positions. 

Crypto trading requires lots of patience and discipline, and you will need to be patient and only trade the cryptos you feel comfortable trading. You do not always want to have the anxiety of always checking if you are in profit or not. You must remember that your goal is to become a long-term trader and make a consistent profit.

4. Using too much leverage with no risk management

You will undoubtedly experience negative events when trading crypto. By negative events, I mean trades that go against your desired outcome, unusual price spikes, mistakes, and many more unpleasant happenings. Risk is normal in trading; every crypto trader takes risks. 

One of the biggest mistakes you can make as a trader is to start trading based on your gut feeling or instinct. We cannot deny that you can get some positive results this way, but it can only be a result of luck and nothing more. It would help if you had a proper plan to manage your risk and get consistent results. Leverage lets you trade using borrowed capital.

As a result, your profits can be magnified, but so can your losses. The latter raises the need to understand how leverage works, its impact on your trading results, and how best to manage it. Futures traders are often tempted to use very high leverage to make much money. However, unfortunately, a little mistake can also push them into deep losses.

Here are a few tips for managing risks and limiting loss

  • Use stop loss order: The stop loss order helps set a market exit point. When a trade goes against your prediction, it minimizes your losses. You can limit your losses by utilizing a stop-loss order each time you trade.
  • Invest in what you can afford to lose: Since the cryptocurrency market is volatile, it is best only to invest a small portion of your available funds. Losing money hurts and hurts more when it was intended for something else. Additionally, trading with money you cannot afford to lose will put you under strain and mental stress, which could affect your judgment and cause you to make more mistakes.
  • Have a trading plan: Your trading plan should include a range of aspects, including when to begin and end trades, how much risk to take per trade, risk-to-reward ratio, and more. Having everything planned out makes trading easier for you and aids in good money management.
  • Always Take profit: It is wrong to always wait for huge profits. Always take your profit as it comes to avoid no profit at all.
  • Set realistic expectations: Realistic expectations are necessary for efficiently managing your risks. With putting too much of your money at risk, it is possible to generate a monthly profit. Setting reasonable goals will help you have better control over trading emotions like greed, fear, and hope.

5. Not Diversifying your portfolio

Diversification is a technique that entails spreading your investments across many assets. Instead of purchasing only one cryptocurrency token, you assign particular portions of your whole portfolio to specific assets. 

You must be aware of the significance of diversity in your capacity as a trader. Sometimes, some of your assets lose money, despite your goal for all of them to increase in value. When that happens, you’ll need to make other investments to compensate for the loss. By not “placing all your eggs in one basket”, you limit risk and reduce volatility, making your portfolio more stable.

6. Revenge Trading

This happens when a trader instantly moves on to another trade following a significant loss to recover from the loss; this is frequently a bad choice because it can increase your losses and is frequently motivated by both fear and annoyance.

After experiencing a significant market crash or investment loss, you must reconsider your plan. Remember that traders have yet to receive a 100% return on their trading. Your cryptocurrency portfolio will remain profitable if your risk-reward ratio is strong, eliminating the need for revenge trading.

7. Taking random advice from strangers and not having an edge

Taking random advice from strangers is one thing that needs to be avoided. A lot of traders blame others for their losses. You are in control and cannot afford to let your funds rely on random people online. It’s good to talk to other experienced traders online and come up with different trading ideas, but trading on someone else’s opinion is not good for you in the long term. 

 Taking random trading advice from strangers regularly without you making personal inputs or contributions limits your discipline, characteristics, and experience of becoming a successful trader because someone else is doing the hard work, and you are just copying them.

Building your edge is one of the essential parts of being a trader because you know your tolerance, how big your positions should be, and the risk. When you take random advice from someone else, you need to know how they are looking at the market. They could be looking at it from a whole different point of view. No one is right, and there is unlimited possibility to make a profit, so it’s not really about what the market is doing; it’s more about what you are doing.

Final thoughts

The cryptocurrency market is highly volatile and risky, and it is important to understand the risks involved before investing. Never invest more than you can afford to lose. Doing your research is important, as you would with any other investment. 

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