Entering the world of cryptocurrency can be like visiting the Land of Oz – once you step through that door, everything is different.
How To Begin Trading Crypocurrencies
If you're a crypto trading rookie, you'll learn all too soon that you're not in Kansas anymore, so here are ways to avoid the top 5 mistakes new traders often make.
1. Don't Diversify Too Quickly
You might have been told never to put your eggs in one basket when it comes to your investment portfolio, but in the world of cryptocurrency trading, it's absolutely possible to have too much diversification, and much too soon.
The reason you need to slow your roll in this circumstance is that the digital currency landscape right now is that it's kind of akin to the Wild West – there are so many altcoins out there now that it's almost impossible to know which ones are legitimate and which ones aren't.
The trick is to do your research and choose widely-distributed coins with high market capitalizations and trading volumes that have shown their longevity. Start with Bitcoin, of course, but then just choose one or two altcoins at first until you've got some experience under your belt.
2. Don't Spend Too Much Time Trading
This sounds counterintuitive, but it's entirely possible to end up making less profit by constantly trading. New crypto traders can often become so passionate about the digital currency markets that they spend every waking moment watching price fluctuations and trying to find the perfect trade, but doing so can be utterly exhausting in a hurry.
You need to temper that passion with wisdom. The crypto markets are so active that even if you miss what looks like one amazing opportunity to profit, they'll be five or ten more down the line just waiting for you. Trading while you're fatigued can lead to stupid mistakes because you're thinking emotionally instead of logically.
3. Don't Panic
The altcoin scene is incredibly volatile. This can create a lot of uncertainty in the heart of a novice trader, and that can all-too-easily generate feelings of panic and fear in your gut – which is the worst emotional state to be in while trading.
Just as trading while you're fatigued from spending too much time watching the markets can be disastrous, making trading decisions because you're feeling panicky about your investment can be a terrible choice. While there's nothing wrong with trusting your gut, never make a decision based on panic and fear.
4. Don't Fall For Scams
The natural inclination for crypto investors is to identify a new altcoin with the potential for growth, invest heavily when it's still inexpensive to do so, and then reap the rewards when the value increases. That being said, the altcoin market is growing so quickly that many new digital currencies hitting the market might not be good long-term investments.
It might be galling to be cautious when it comes to investing in new altcoins as they hit the market, but doing so shields you from being involved in a scam in the making. Being screwed by a pump-and-dump scheme – something that happens all too often in the world of cryptocurrency – can keep you from watching your investment disappear overnight.
Even worse are proprietary altcoins that are available only through a closed system. These coins – usually pre-mined by the company that created them – are only tradeable within this company's closed system, and are extremely susceptible to value manipulation. Be exceedingly cautious before investing in one of these types of altcoins.
5. Don't Select The Wrong Exchange
Just as the number of altcoins hitting the market is growing exponentially, the number of cryptocurrency exchanges that you can trade these currencies on is also increasing.
The problem is that not every new exchange is created equal; new and untested exchanges could turn out to be a nightmare in the event they don't honor withdrawals or become inaccessible at the wrong time.
Begin your crypto trading career with long-standing, well-respected exchanges that support a wide number of already established digital currencies. While it may seem like you're missing out on an opportunity by doing this, keep in mind that the ability to reclaim cryptocurrencies from unknown, untrusted companies can be next to impossible.
Watch Your Step & You Won't Fall
The world of cryptocurrency trading is by turns exciting, exhilarating, and terrifying. You don't want to end your crypto trading career before you've even gotten started, so ensure that you take conservative risks until you've garnered some more experience.
Novices can easily fall through the cracks of this highly complex world, especially when it comes to altcoins – and missing these pitfalls is even more likely if you're inexperienced. However, these five tips should help you navigate these murky waters and come out the other side without losing your shirt.