Crypto Beginner

Crypto trading mistakes to avoid: A comprehensive guide

crypto trading mistakes to avoid

Anyone can learn to invest in crypto. The trick is to invest at the right moment. However, learning to time your investments isn’t so easy. That said, it does help to learn from your crypto trading mistakes and be willing to adjust your investment approach. Here’s a rundown of some mistakes you could look out for and stay away from.

Common crypto trading mistakes beginners tend to make

Investing in cryptocurrencies can be thrilling. With all the excitement, many novice investors fall prey to a few typical crypto trading mistakes. You could quickly lose money due to subpar security procedures or a lack of understanding of crypto markets. Here are the basic mistakes that are best avoided.

Failing to understand the market

Many investors start trading crypto, only to discover that the market crashed the next day. This happens because they have failed to understand the market. But that doesn’t mean you need to sell off your crypto holdings out of fear. To stop yourself from doing that, you must clearly understand what you want to achieve from their holdings and what it takes to get there.

It also helps to know the price history of your crypto. Because cryptos have a reputation for being unstable. A minor market decline does not mean all your money will be lost at once. And studying the market well will give you the confidence to hold on and hang in there.

Not diversifying your portfolio

Given the volatility of cryptos, investors and traders must diversify their holdings to offset any potential losses. As a novice, it may be safer to start with more resilient and reliable coins.

Chasing quick profits and FOMO

Fear of missing out, or FOMO, is common among crypto investors. Investors who succumb to FOMO may buy an asset just to hop on a trend and end up amassing losses instead.

Project managers or investors sometimes fuel this by sending out persuasive messages. Many shills will also use FOMO by telling their audience how some particular crypto is the next great thing, its price is skyrocketing, and that if they don’t get in now, they will regret it forever. They induce FOMO by convincing investors to make imprudent purchases.

Not using stop-loss orders

Trading cryptos is risky, and it is easy to make trading mistakes. Therefore, losses might spiral out of control when you do not understand when to exit the market. A stop-loss order helps the trader cease trading when the losses mount in such a scenario. You, as a trader, get to fix the stop-loss price, below which you do not want to risk anything, and the broker will close your position automatically when that price is reached.

Stop-loss orders, therefore, let you control risk without continually monitoring the market.

Crypto trading mistakes to avoid as an advanced trader

Frequently, the most robust trading strategies are developed through years of crypto trading. However, if you’re a novice, you may learn to develop the finest trading tactics by steering clear of these pitfalls.

Over-leveraging your position

One often hears stories of people making it rich through crypto trading. Such stories may tempt new investors to attempt to use leverage to increase their earnings. However, leveraged trading has the drawback of requiring upfront security, and if a deal fails, you risk losing all of your money.

Not staying up-to-date with market developments

The excitement around crypto may be a big draw for new investors, but succeeding with crypto trading requires sound knowledge of the asset and all developments related to it. Trying to trade or invest in an asset you don’t fully understand is a recipe for disaster.

Not having a risk management plan

There is no question that bad things will happen to you when trading crypto. Crypto trading carries some amount of risk for every trader. Because crypto is way more volatile than many other assets. You have to foresee that.

Ignoring the impact of taxes on your profits

Because there is little ambiguity regarding the taxable status of crypto activities that might result in receiving money, failing to submit crypto revenue is a typical error concerning crypto taxes. When you get the revenue, several nations tax these transactions even if you don’t use it for other purposes.

Emotional crypto trading mistakes to avoid

New crypto investors have a lot to learn from all the action around them. But they can only do that if they learn to get a good hold of their emotions. Because errors in judgment can arise if you let your emotions get the better of you. Here are some key mistakes that you need to look out for.

Letting fear and greed influence your decisions

The cryptocurrency market may occasionally be erratic. This is partly a result of the emotional responses of investors. Whenever the market is up, people tend to experience FOMO and may even become greedy. Conversely, they may experience dread and sell off their crypto hastily when the market drops. Both are bad ideas. Never let your emotions take the driving seat.

Not sticking to your trading plan

A good strategy can help you stay calm and conduct your business as planned, even in an unpredictable market. Nevertheless, it is tempting to stray from your plan during moments of emotional upheaval. But giving in to the temptation will put you at risk.

Not being willing to cut your losses

You should definitely have a trading strategy to limit losses in place. Whenever you feel the urge to stop or open a particular order, this will remind you that the transaction is not part of your strategy for a good reason.

Not taking responsibility for your actions

It is easy to go away from a bad trade with no lessons. It’s easy to think that market volatility took over, and you just did what you thought was right. While that may be true to an extent, it doesn’t help to not take responsibility for your actions, especially when you fall prey to FOMO. Recognizing that you did something wrong and could do better is half the battle won as far as being mindful of your choices goes.


Trading and investing in crypto is a dangerous endeavor. There is no guarantee of success. However, understanding the markets and their movements can help to a large extent. And buying crypto mindfully will help you obtain better returns on your investment. So stay mindful, learn from your mistakes and those of others, and you’ll be okay.


What mistake do most crypto traders make?

Most crypto traders make common mistakes like overtrading, lack of research, emotional decisions, and not using risk management strategies.

How do you avoid losing in cryptocurrency trading?

To avoid losses in crypto trading, have a plan, research, avoid FOMO, use stop-loss orders, diversify, and consider passive income strategies.

How long should you hold crypto?

Holding crypto can vary but consider long-term investment for potential gains, aligning with your financial goals and risk tolerance.

What is the 4% rule in crypto?

The 4% rule is a retirement strategy, not specific to crypto, suggesting safe annual withdrawal amounts from a diversified portfolio.

Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered investment/financial advice from CoinSwitch. Any action taken upon the information shall be at the user’s risk.

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