Common Mistakes Crypto Traders Make and How to Avoid Them.

crypto trading mistakes to avoid

Trading Crypto comes with certain risks, and if you are not too careful you can lose your capital when trading. That’s why it’s very important you know these common mistakes crypto traders make and how to avoid them so you can save yourself from being rekt.

You might be a crypto trader, who for a long time has found it difficult to cope with market volatility and as a result, lost huge amounts of money. It has probably reached the extent that you blame a lot of factors as causes for your loss. Have you taken a look at your trading strategy? Look deeper and you might find out that you have been making gross mistakes that are hampering your financial goals and growth.

Trading generally is a large field that should be carefully studied, most especially when it has to do with very volatile markets. Hence, you need to be aware of loopholes that you can and must avoid. Trading comes with mistakes but the ability to learn from the mistakes of others helps you do better in every round of trade you embark upon. More so, every inch in understanding market trends is as important as the trading itself. In this article, I will be taking you through eight trading mistakes you need to shun. Doing so will save you a lot of losses. There is a saying that experience is the best teacher but this article debunks that because by the time you’re done going through it, you would have learned enough to make strategic plans, hence experience need not teach you. Just turn your mind to the article and learn as much you can.

Trading Without Knowledge or Fundamental Analysis.

The mistake you should always avoid making is trading without an adequate idea of what trading in that particular market entails. Possibly, you have been listening to your colleagues talk about investing in a stock or acquiring bonds prompting you to blindly decide to invest in the market or trade stocks, possibly because you think you can triple your income in the blink of an eye by investing that way. Perhaps you wish to rely on luck (which I will talk about next) but then, that would be a bad trading strategy and an error you must avoid.

Enlighten yourself on the rudiments of trading and its fundamental aspects before investing, which means that you should arm yourself with a sufficient understanding of the market and the stock you wish to trade, the customer base of the company you wish to trade with, etc. Make sure you’re sufficiently filled with the requisite knowledge so as not to regret your decision once you embark on this journey.

Relying On Luck

Chance commonly called luck plays out in most scenarios, sometimes giving rewards. However, it will always be a wrong strategy to replace planning, skill, and adequate knowledge with mere reliance on chance.

Almost every trading newbie repeats this mistake. They always underestimate the place of skill and working knowledge about their investments, preferring assumptions and relying on chance. Luck could help you once or twice, but in the long run, it produces disastrous results for your investments or portfolio, which of course would be labeled bad luck by anyone.  This isn’t bad luck or ill chance, rather it is a lack of proper preparations and planning.

Another problem with reliance on luck is that it is capable of making one overconfident about a particular strategy especially if there was a little dose of “good luck” for such an individual. These most times cause traders to lose their thinking and logical mindset to completely depend on luck with the hope that the same strategies would always bring good results. The reverse always turns out to be the case in these circumstances.

How does one deal with this? As much as possible, equip yourself with enough knowledge about the market, make concrete plans, and never underestimate the Importance of skill in your plans. Make sure you always have a fallback plan as you constantly rely on skill and knowledge instead of mere luck.

Related: What is Dollar Cost Averaging Crypto Trading Strategy

Not Having a Plan

A plan is a detailed analysis of the steps you wish to take to reach a particular outcome. Following, a trading plan is an assemblage of the strategies you wish to employ for high yield profit. Not having a plan is a bad strategy and you must avoid taking such a step.

The success of your investment or trading should be measured by how well you stick to your plan, not how much you raked in. Having a trading plan and sticking to it, implies a measure of discipline. Of course, sometimes acting without a plan can bring in great returns (that is relying on luck) but that will fail the more you keep doing it. Having a trading plan and sticking to it despite losses in the short term, is a strategic way of making sure your investments are secure.

On this note, a good trading strategy would be having a plan and sticking to it. This is essentially a smarter thing to do. Of course one cannot be too rigid with plans; a little flexibility can be employed when necessary, nevertheless, it should never be a window to trade without a sufficient plan.

Not Diversifying Your Portfolio

Firstly, what does it mean to diversify? Diversifying your portfolio means investing in different stocks across different industries. What this does is that it minimizes the risk of concentrating your investments in a single stock. The risk with concentration is that if for any reason, the stock falls, your investments fall with it. Diversification on the other hand means that even if one stock should fall, you can count on the other different stocks to bring in returns. If you don’t diversify, you put yourself at the risk of losing everything.

The diversification of your portfolio minimizes risk and in the long run, you can grow a fortune by making profits from different stocks.

One could say a concentrated investment comes with huge rewards as well. However, in trading, you look at the long term and the risks you can avoid taking. Diversifying your portfolio doesn’t mean that some stocks won’t fall but you can expect others to yield profits. Concentrating on your investments is not advisable as even the popular saying of “do not put all your eggs in one basket” supports this fact. This is one reason why portfolio diversification is recommended.

Order Book Depth

An order book is an electronic list for selling and buying orders on a particular stock, bond, or even crypto. These are organized according to their respective prices. It lists the number of shares being offered at different price points.

This list aids traders in identifying what securities to purchase and also maintains transparency as it supplies information about the securities being offered.

The mistake traders make is not consulting the order books instead they remain reactive to the market. Order book depth is important in finding out what orders are placed and how different bids affect the price. This is a shrewd move because it is beneficial for traders to understand the price expectations and projections of the market. It makes them proactive and not reactionary to the market dynamics.


What do you refer to as hype in the stock market? This is simply when a stock enjoys so much attention that great demand from investors increase.

Hype happens or occurs when investors begin to get interested in stock to the point of purchasing these stocks. This normally happens when there’s a significant improvement in the stock itself that these investors have since there’s a potential for profits that prompts them to buy.

One thing to avoid doing is investing in hyped-up stocks without sufficient understanding of the stock itself. Investing in a hyped-up stock goes this way: you identify a stock that is performing well, you invest in it. The thing is you could rake in profits but you could very well find yourself with losses if that stock should plummet. The idea is that you shouldn’t just invest in a stock simply because it has been performing well, it could still crash. The past performance of a stock does not translate to better results in the future.

The rationale behind investing in hyped-up stocks is the assumption that these stocks will keep going up. This is a wrong assumption to make because there’s no guarantee that it would continue doing so. This happens mostly because we rely on recent profits from stock. Mistakes like this led to stock crises in the past.

The smarter thing to do is to understand if there is a valid reason to buy a particular stock. This is where information and knowledge about the real strengths of stock become necessary. Try finding out if such stock is performing well because more often than not, a stock might just be hyped and nothing more. So be careful of hyped-up stocks and make sufficient analysis of the stock.

Buy High Sell Low

This practice usually involves investors trying to time the market. Once these investors perceive that the market they invested in is going down, they sell their stocks and try to invest in another market. This cycle repeats itself and these investors don’t always have huge returns. These types of investors buy stocks at a particular price but due to indiscipline, they sell the stocks they have at prices lower than what they bought them for.

To avoid taking such steps, take your plans seriously and be disciplined with them as much as possible. Also, employing a dollar-cost averaging technique to investments is a great tool as you can purchase equal amounts of stocks over time and even more importantly, diversify your portfolio (I talked about this previously). Buying high and selling low is a bad strategy and is not long-term in any way.

Lack of an Exit Strategy

A sound exit strategy is important for any trader. If a trader lacks a sufficient exit strategy, it affects him or her negatively. A good exit strategy is important as it can limit losses by a lot. An exit strategy is simply how a trader wishes to get out of a market.

The way you exit the market could be beneficial or detrimental. It’s not just about a good trading skill; a plan on how you intend to leave is just as important as all other previously explained factors.

Conclusively, these are the mistakes you can actively avoid and the different strategies you could employ to make sure you do not keep losing out on your investments. Finally, Patience and discipline are key to applying these strategies as well as focusing on long-term benefits.

Kindly leave your questions and comment in the chatbox for further clarifications.

5 Comments on “Common Mistakes Crypto Traders Make and How to Avoid Them.”

Leave a Reply

Your email address will not be published.