The cryptocurrency market is thriving like never before as Bitcoin’s capitalization reaches a whopping $144.96 billion U.S. dollars at the end quarter of 2019. With skyrocketing numbers, it’s easy to see why many want to try their hand at day trading cryptocurrency, though its volatility requires a highly analytical mind to keep up.
Trading refers to an activity that aims to extract profit from the trading process in the crypto-world. With the ever-changing market and various cryptocurrencies, it’s understandable how daunting it can be to get a solid foothold on day trading. In spite of its difficulty, making trading beginners tend to be overly-enthusiastic due to the market’s plethora of opportunities.
These common pitfalls could cost you a fortune, which is why we’re nipping the problem at its bud so you can start on the right foot:
Mistake to Avoid #1: Trading Too Much, Too Soon
As the digital currency on the market rises with excessive promise, it’s no surprise that many beginners jump into the game by trading too many cryptocurrencies, too soon. Letting your excitement get the best of you has a high chance of backfiring, especially when you obsess about every change in price.
You need to take the time to familiarize yourself with the market, especially since it is in constant flux. A well-thought-out strategy is a must if you want to be the one holding the bag, so be sure to be rational about your investments. With so much fluctuation, your opportunity to get cash will come.
Mistake to Avoid #2: Diversifying Too Quickly
Many newbie day traders believe that investing in a diverse range of cryptocurrencies can increase their chances of hitting the lottery. With so many investments, one is bound to take off, right? This line of thinking can lead to costly consequences, especially when you consider how challenging it is to differentiate the authenticity between altcoins with its abundance on the market.
That’s why slowing down and investing your time doing research is a vital step before you venture out into the world of day trading. Keep a close eye on currencies that have mark high trading volumes and market capitalizations to get to know the tricks of the trade. Once you get the hang out it, try your hand with Bitcoin first before branching out to other altcoins.
Mistake to Avoid #3: Failing to Use Risk Management
Just like with any endeavor, charging into the trade without any strategy will only lead to costly mistakes. That’s why utilizing risk management is a must when it comes to trading within the fluctuating cryptocurrency market to keep you from burning holes in your pocket. This involves understanding how to hedge your trade, which is a critical tip that can save you losses and headaches down the line.
As a beginner, it’s best to invest in the least expensive cryptocurrency and sell a portion that’s worth the most. If the value increases, you can celebrate your first big break, though you will have protection even if the value decreases.
There are opportunities left and right within the cryptocurrency market, but day trading often feels like a roller coaster ride, which is why you need thorough research if you want a smooth experience. Equipping yourself with proper knowledge is the key to success, and with that in mind, familiarizing yourself with common mistakes by beginners should already give you a good headstart.
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