Despite humans being the wisest of all creations, they usually like to learn things the hard way. The other effective method of learning is by looking at the mistakes of others. When you do things right, you never know what can go wrong. So, when something goes wrong, you should consider it a great lesson. The same applies when you are trading cryptocurrencies. It is a new market and so nobody really knows much about the strategies of making profits in this market. However, once you know the ways of losing money, you will keep away from them so you can keep on making money.
Here XTRgate explains the 5 surefire methods of emptying your pockets while trading cryptocurrencies. The idea behind telling you these ways is to teach you which methods NOT to try.
The 5 Ways to Lose Money Trading Cryptocurrencies
1. Trade without Learning
Some random guy on YouTube told you that trading can make you a millionaire. He then tells you the method of joining an online broker and using a trading platform to make money. You pay full attention to every detail, sign up on a trading platform the next moment, and start losing money straight away. Well, that’s because you never learned how to trade and just started trading. If you had followed the same steps to participate in a lottery, that would not have been such a big blunder. However, in the case of trading in the cryptocurrency market, you have to learn trading beforehand.
The good news is that you have your online broker as the biggest source of knowledge on trading. When you sign up with an online broker, you are always given access to a huge repository of information on trading from the broker. You will receive ebooks, videos, and webinar access through which you can learn trading. With webinars, you can learn trading from specialists who can also answer your questions that might arise in your mind at the time of learning. Hence, this method of learning proves to be one of the best today. Make sure you pick your broker based on the recentness of the information.
2. Using Leverage Blindly
One of the biggest mistakes that new traders make is of using leverage the way it should not be used. First of all, you will notice that most online brokers keep their leverages small for new traders in basic accounts whereas the leverage in large accounts is quite big. That’s because they know that new traders use leverage blindly. Yes, leverage is a huge attraction that online brokers use to lure traders from around the world. However, you can lose a lot of money or almost all the money if you use leverage too much and without proper care.
Leverage means that the broker will make some contribution with you to increase the size of your trade. If you cannot enter a particular trade because the money in your account is not enough, the broker will contribute the money on a basis of a ratio to help you enter that trade. Yes, you can make huge profits this way but leverage amplifies your losses in a similar manner too.
3. Investing in a New Cryptocurrency without Research
This might sound unfortunate but it is true that not all cryptocurrencies that you see in the market are viable. Some of them are based on concepts that cannot survive in the real world. Many cryptocurrencies disappear right after their launches because of their inferior concepts. So, before you invest your money in a particular cryptocurrency, you should make sure that it has come with a valid, practical, and resolving idea. Also, you should find out about the team that’s behind the creation of the cryptocurrency. If anything sounds suspicious, it probably is.
4. Trading Based on Only One Type of Analysis
Less is not enough when it comes to trading cryptocurrencies. When you are putting your real and hard-earned cash on the line, you have to make sure that you find out about everything that makes your trade successful. So, you have fundamental and technical analysis. You have two groups, each supporting only one type of analysis. Where you will make the difference is that you have to use both. You cannot rely on any one because their use and effectiveness is only situational. A technical analysis might tell you that it is okay to invest in a cryptocurrency but a fundamental analysis might tell you something about the developers of the cryptocurrency that might change your mind.
There are not many traders who use both methods, but those who do usually benefit from this strategy a lot.
5. Trading with Emotions
That’s the recipe to losing money in any type of trading. Do not think that losing money by trading emotionally is only limited to cryptocurrency trading. It does not matter which financial market you are in and what asset you are trading, you will lose money when you let your emotions rule your head. Emotions are always there when you trade regardless of whether you are a new trader or an old one with years of experience. However, emotions blind you from seeing the real picture. You start trading only to satisfy yourself. You lose a trade and feel like trading more just because you do not like the taste the loss has left in your mouth.
You win a trade and you start trading recklessly because you become greedy to make more profits. However, things do not work that way in financial markets. You have to keep your emotions out of the way to trade profitably.
If you are thinking about trading cryptocurrencies, you should pay close attention to the pointers given above. They are there to tell you everything that you should not do. Many new traders have made these exact mistakes while trading in cryptocurrency market and by learning from their mistakes, you can become a professional and profitable trader in no time at all.