Bitcoin’s popularity for the past two years has created a hype among investors, traders, and consumers. Many people have become interested in making Bitcoin their primary mode of exchange due to low fees, value increases, and transaction speed. Even those who had previously no experience of trading are now taking interest in finance and trading Bitcoin. However, traders make simple mistakes that they can avoid while trading and investing. In this article, we will be presenting five tips that new traders can use to avoid making common mistakes.
- Invest that you can afford to lose
Bitcoin is a highly volatile investment, which means a trader can see very high gains or losses. Poor decision-making in trading Bitcoin also adds to the scope of losing money. Thus, one should only invest an amount that they can comfortably lose. An intelligent investor will have a diversified portfolio instead of allocating all the funds to one asset class. Moreover, when the market declines, investors tend to sell off their holdings at a low price to reduce their losses. This results in losing more money once the market stabilizes and traders buy back at higher prices.
- Choose a sustainable pace
Trading is an ongoing race, not a sprint. Bitcoin market participants need to set up a timetable that is feasible over the long haul. Contributing a great amount of time on a daily basis prompts exhaustion and disappointing performance. It is not possible to trade viable all day, every day. The ideal approach is to work out a practical schedule by determining the ideal times to trade and concentrate on those periods only.
- Set goals for each trade
This is important during times of extreme volatility. When trading Bitcoin, pre-determine what price to take profits or cut losses. This prevents making trading decisions based on emotions. Setting goals and price targets can keep a trader from becoming greedy when experiencing despondency or euphoria after a market crash. For safe Bitcoin trading, we recommend one of these sites:
- Learn to read charts
The expertise of technical analysis comes with time; however new traders should at least be able to read charts to identify market trends. Bitcoin Wisdom is the most widely used Bitcoin charting tool. It may look overwhelming in the first glance but it is very intuitive.
- Stop losses should not be too low
A stop-loss liquidates a trader’s position if the losses reach a certain value, thereby stopping a trader from losing anymore. However, we suggest that traders should not use a stop loss that is too small. Selecting 10:1 leverage implies that 1/10th is your deposit of the position size. This deposit decides the stop value, the price at which a position can descent until the deposit can never again cover the position’s loss. Traders must keep in mind that lower leverage follows a bigger stop, which as a result, is perceived comparatively a safer way to explore the trading basics.