The digital age we live in has influenced every walk of our lives. There have been innovations that helped us in our personal, professional, and financial lives. One such digital creation that has been a boon to our personal financial growth is Cryptocurrency. It is the digital or virtual currency that is used to purchase or sell goods and services.
Cryptocurrency has been in the market for a while and its fame keeps going up with each passing day. These decentralised digital currencies stored in digital wallets have been making some overnight millionaires. People are going crazy behind these digital assets for quick earning with minimal effort. But there are certain mistakes that people make running after these fast bucks.
Just as in any other trading, Crypto trading also demands thorough research, attention, and analysis. The supply and demand chain pulls the lever of the industry. A basic understanding of the related phenomenon of cryptocurrency such as blockchain and cryptocurrency mining could keep you on top of your game.
If you are a part of Crypto trading, check for these red flags mentioned below to keep yourselves longer in business. You can also d-addicts.com to get some relevant tips to level up your trading strategy.
1. Investing in a single crypto
This is the first sign that you are doing trade the wrong way. Investing in a single type of cryptocurrency is a common mistake. Many people still swear by this method, as single crypto would help them keep track of the market trend easily. The fact is that this method would initially prove to be fruitful but not in the long run.
If you invest all your money in a single crypto, a crash would mean you lose all your money. This does not suggest you go crazy buying all the different types but diversify into 3-5 crypto. To name a few there are Bitcoins, Ethereum, Chainlink, Ecomi etc. Always buy according to your risk tolerance or it is sure to hit you hard.
2. Buying high and selling low
This happens when you look at a single market trend and go all-in with your money. If you run to buy a share on seeing a trade go up with no research, the next day it could drop down leaving you at a loss. It is always better to have a strategy and understanding of the market as this would provide you with the knowledge of how and when to enter and withdraw from the trade.
A few things to be taken into account while investing in crypto are the supply, market capitalisation and integration. These factors can remove some amount of uncertainty revolving decisions of profit or loss.
It is always better to practice the hold on method as it helps get profits in the long run. A good market study will let you know when to take the profits and move on.
3. Using leverage
Also known as on margin trading, this requires some expert-level understanding. Leveraging means borrowing money to invest and this should be on the never to-do list for a beginner.
Using leverage indicates that you borrow money with all the money you own as collateral. A crash in the trade you trusted with all your money could get you liquidated i.e., lose all your money in a single go. So it is better to stay away from this high-risk investment unless you have an extremely high-risk tolerance.
Here, there could be no room for learning from mistakes as a single decision would cost you your entire savings. The right way to do this is only when you have proficiency in understanding the complexities of market behaviour.
4. Unaware of technical analysis and market trend
This is the reason why 70% of people investing in cryptocurrency lose all their money. Technical analysis means knowledge of the timing and trend of the market. Some technical indicators or patterns set the stage for a profitable business.
Various studies have been conducted to analyse these patterns such as the Turtle soup pattern strategy or the Nem(XEM) strategy.
The Turtle soup pattern means analysing a two-day breakout of the price and predicting the future trends of the market. This analysis would lead to a better outcome rather than throwing money in some random place. A thorough study of these patterns along with expert tips from financial advisors can ensure success and high yields.
5. Investing all your savings on crypto
There is nothing to brainstorm here. It is a universal fact that you cannot afford to buy more than you can afford to lose. This is simple yet the most important focus point while investing.
Investments at the right age, right time and the right place can prove to be highly rewarding, but these also come with the dangers of losing your entire lives’ savings, if not done right. You should always invest according to your life goals and risk tolerance.
In your 20’s you are free to invest more, experiment in new financial domains and make a few mistakes. But in the late 40’s or 50’s that would not be the case and could lead you to end up losing all your savings. It would not be an easy task to get back up from ground zero you landed yourself in. Lack of caution might make you land in soup.
As more and more people get lured into this lucrative market despite its volatile nature, it is essential to educate them about the hidden troubles. To survive this high yielding yet high-risk market they should have a risk management strategy and the awareness of trends of trade.
The best way to do this is by making an informed decision with the knowledge of current and future market demand by analysing the overall economy of the world. Along with this, a simple reminder that financial decisions should never be an emotional choice would assure the welfare and financial security of the investors.