- Having a trading strategy is imperative when crypto trading
- The importance of choosing a reputable broker has recently been highlighted by the fiasco occurring with FTX
- Not using a Stop-loss is a costly mistake that many a trader has experienced
Traders make many of the same mistakes when trading cryptocurrency that they do when they trade any other type of asset. When you learn from your own mistakes, we call that experience; but when you learn from the mistakes of others, we call that wisdom. So, with this in mind, let’s discuss the three biggest mistakes to avoid while trading crypto.
1. Not having a trading strategy
Having a trading strategy is imperative when crypto trading. A strategy is simply a plan of action to achieve a long-term objective. The mistake of not preparing (or following) a trading strategy can occur in several ways, including embarking on revenge trades after a loss, following the herd to place a trade (especially prevalent in crypto trading), and exiting a trade in panic. Therefore, it is prudent to always have a trading plan and stick to it as much as possible.
2. Not using a trusted broker or platform
A cryptocurrency broker or platform can be described as your connection to the marketplace, allowing you to trade cryptocurrency. The importance of choosing a reputable broker has recently been highlighted by the fiasco occurring with FTX.
Factors to consider when choosing a broker for your trading include whether they hold any licenses from Tier-1 regulatory bodies, the cryptocurrency assets supported on the platform, the available asset pairs, the security of the exchange, and the available deposit methods.
3. Not using a Stop-loss
Cryptocurrency can be extremely volatile, perhaps more so than any other asset. As such, not using a Stop-loss is a costly mistake that many a trader has experienced. A trader only needs a small amount of technical analysis knowledge and an understanding of how much they want to risk with each trade (as per their trading strategy) to figure out where they should place the stop-loss. As a crypto trader, for each trade, you should always manage your risk by putting your stop-loss accordingly.