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Welcome, crypto rookie!
If you’re reading this article, I can only assume you’re looking for guidance to get ahead in the world of cryptocurrency. If that’s the case, congratulations! You’ve already avoided mistake #1 on the list, so you’re off to a great start.
Before really diving in, it’s imperative to learn about the volatility of the industry and familiarize yourself with the internal processes. Educating yourself can potentially change your whole outlook on investments and help you avoid rookie mistakes that could cost you hundreds of dollars.
One of the best ways to avoid making certain mistakes is learning from others’ past experiences in the industry. This is why I’ve composed a short guide on some of the most common errors for those who are new to investing.
Naivety: Not Doing Your Homework on the Investing Process
The easiest way for new traders to minimize their losses and maximize their profits is by learning from the mistakes of others and getting accustomed to the processes of crypto trading. You can do this by simply searching informative articles (like this article), helpful tips, and other available educational resources that the internet provides.
In addition, some available online courses and apps assist with the learning process. Everyone has a different “learning language,” so choose what resource suits you best. Also, it’s important to keep in mind that not everything you read online is true or accurate. So, be sure to know which platforms provide honest and accurate information. Unbiasedly speaking, Gokhsteinmedia.com is my choice for educational and credible cryptocurrency news/stats.
Impulsivity: Not Researching Before Investing
Trust me when I say, you need to read up on the asset you are investing money into. You may come across a new coin with excitement and wish to invest immediately. Don’t. It’s important to explore the history, the founder, the development team, the characteristics, etc. This will prevent you from blindly investing and possibly losing your money on a coin that is just a passing fad.
You can research the price on various online data aggregators such as CoinMarketCap. This site provides a list of cryptocurrencies in the market and the tracked price of each. Forums and online communities are also extremely helpful when viewing the best investment opportunities.
Tunnel Vision: Not Diversifying Your Portfolio
By spreading your investment across various cryptos, you can reduce risk and maximize profit. Generally, having a portfolio blended with the largest and most stable coins is recommended for beginners. An 80/20 ratio of large-cap to mid and small-cap can minimize liquidity issues and stabilize profits from any sudden surge in the market.
Carelessness: Sending Coins to the Wrong Address
A wallet address is a digital address composed of letters and numbers for sending and receiving cryptocurrency transactions. Think of it as a bank account with a routing number. If you or someone you know has made this mistake before, you know the recovery process is not fun to deal with.
There are some exchanges that may send your deposit back, but some may not. Even though some exchanges support this issue, others may charge you a fee of up to $2000. So make sure you double or triple-check where you’re sending your coins/tokens.
Impatience: Buying While at an All-Time High
You may have heard the phrase, “buy low, sell high.” It’s good advice considering that is how you make money when investing. When markets are at an all-time high and you buy in, you’re making a rookie mistake. Many beginners make this error due to FOMO (Fear Of Missing Out). But, patience is key when investing.
By purchasing the coin that’s at an all-time high, you fail to see the bigger picture of this dance we call trading. The market ebbs and flows, but investing during peak is only valuable when you have a long-term plan (I’m talking about a 10+ year plan). So, in conclusion, amidst the market changes, invest in a stable coin, at a stable frequency, and in steady amounts. Slow and steady wins the race, remember?
Foolishness: Investing More Than You Can Afford
This item on the list deals with basic financial planning and health. Before you begin investing, you should consider paying off high-interest debt, adding to your retirement savings, and reviewing your living expenses. In addition, it’s important to think about the upcoming year and the long term. So before you get started, ask yourself, “am I in a position to buy crypto right now?” In short: be smart with your money.
The Bottom Line is…
Get educated. Do your research. Don’t believe everything you read or are told. Double-check before you commit to sending coins. Buy steadily and at a suitable frequency. And don’t over-invest!