Crypto Trading Do's and Don'ts – Avoiding the Pitfalls of Cryptocurrency Trading

Cryptocurrencies have become the craziest phenomenon in the world of finance, despite facing the wrath of several large regulators from numerous economic powerhouses. Of course, cryptocurrencies are extremely volatile, with most instruments never offering any guarantee for the investors' funds. Nevertheless, we can't ignore the importance of cryptocurrencies as a viable trading opportunity, whether for speculation, for investment, or for making short-term profits with crypto trading. Therefore, let us take a look at some of the Do's and Don'ts while dealing with the risky but exciting cryptocurrency market.What is Crypto Trading - How to Trade Cryptocurrency Assets? What is Crypto Trading - How to Trade Cryptocurrency Assets? Click here for more information about Crypto Trading.

The Do’s of Crypto Trading


Have a Fair Idea of the Cryptocurrency Market

It would help if you took your time to learn about the fundamentals of investing, the cryptocurrency market, and the different dynamics that contribute to a safe and profitable trading environment. You can't learn enough about the market and prevent a loss, but the secret here is not to find the silver bullet, rather preparing yourself to discover the trend of the market with an above-average accuracy. In essence, you should be able to relate the market movements with better precision than the average trader.

Invest Well within Your Means

The onus lies on every trader to ensure that they trade well within their means. It means that you should not invest money that you cannot afford to lose. The underlying principle is that you can continue with your lifestyle, regardless of the wins or losses in your cryptocurrency trading pursuits. Trading with money that you can afford to lose will remove the emotional or psychological element to a greater extent, although it would be impossible to remove entirely. Therefore, even if you are on a losing streak, you can sustain yourself by managing your finances.


Create a Portfolio

Most avid investors, speculators, and traders included are highly intent on diversifying their investments. They don't hold all of their eggs in a single basket; rather, they believe in creating a portfolio where the risk is mitigated. Although you may not be interested in diversifying your investments to other markets or financial instruments, you should at least try to diversify your capital by trading different cryptocurrency assets. Such a move will help you avoid severe downside risk if only a single cryptocurrency fails against the others in the market.

Develop a Strategy or a Trading Plan & Stick with It

Crypto trading, as is the case with all other types of financial products, is entirely dependent on the trader employing a sound strategy to win. Without a good trading plan, traders are merely gamblers, and in that case, the wins and losses are down to probabilities. We are always aware that in gambling, the house always wins, but in financial markets, traders do possess a certain amount of control in the outcome. Therefore, it is absolutely for a cryptocurrency trader to have a solid plan and a strategy, and then stick with it without falling into a gambling mentality.


Track your Trading Performance

Finally, traders must track their performance and continually improve their trading efforts to keep winning consistently. Trading the cryptocurrency market is all about achieving profits consistently, which can only be done by understanding your trading behaviour and tweaking your plan to ensure that you weed out any inconsistencies. Tracking your performance can also help in avoiding any serious trading pitfalls that you might not notice regular your regular or live trading sessions.

The Dont’s of Crypto Trading

Jumping in without Preparation

Don't trade cryptocurrencies just because they are the latest trend in the financial markets. Do not buy into the concept of trading in a volatile financial instrument on the pretext of getting rich quickly or earning insane amounts of profits. You may lose your entire money just because of a downside swing in the market. Or on the other hand, you may be susceptible to a fraudulent scenario where you will face monetary loss and undergo legal hassles. Do your proper research before committing your money.


Experimenting with New or Unknown Cryptocurrencies

You may come across a cryptocurrency that promises sky-high gains within a short span. Or at other times, you may be given an opportunity to enter at the ground level of an up and coming exotic crypto instrument that is 'guaranteed' to move up in the coming days. Unless proven in reliability, safety, and security, you should never indulge in trading any unknown crypto instruments without proper research.

Extending your Leverage

Leverage is always risky, even for regular financial instruments, but leverage can wreak havoc in highly volatile markets such as cryptocurrencies. Massive swings are quite common in this market, and if you are not careful with your leverage, you can lose your entire trading account in just a single instant. Of course, once the volatility is over, you will be wondering about your trading call and the circumstances that led to the wild market swing.

Following Social Media Hype Blindly

Social media has become a double-edged sword in financial markets, especially in cryptocurrency trading. We see countless trading gurus, financial experts, cryptocurrency promoters, and similar personalities gracing several platforms. The overload of information can be counter-intuitive, especially for beginner traders, and you should refrain from using social media information in your trading strategies. Of course, you can always use them as your reference, but never make them your sole criteria while executing your trades.

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