Bitcoin Is one of the most popular virtual currencies. The coin holds a lot of potential for most investors, making it one of the most widely purchased coins.
However, there have been some challenges with trading bitcoin. The risk in trading crypto is becoming a major concern as people are becoming rich overnight due to scams causing others to lose money.
In this article, we have stated some of the risks you should be aware of when trading bitcoins.
Don’t always buy when the price is low
It is certain that prices usually fluctuate in the crypto market. This doesn’t mean you have to buy whenever the price drops.
In November 2018, the price of one Bitcoin was about $6,461 and the price on December 2017 17 was $20,000. On the 24th of December the price remained at 14,626, and buyers could not sell their investment.
The bitcoin market usually goes up and down. With such inconsistencies, it is not certain that your expectations of the market will be meant. This is not to say do not buy the dips, just ensure you study the market very well to avoid any huge loss.
Not having a strategy
Often, people venture into cryptocurrency trading without having a real plan or strategy. This is wrong. When buying a coin, you need to have an intention about it. Do you want to HODL for a long term or short term? Are you buying to hold for life? Or do you intend to sell up immediately?
These and more are questions that you need to ask yourself. Whether you are holding it for a long or short term, you need to have a vast knowledge in technical analysis, crypto charts, and more. Doing this will give you a forehand in the market and help in making profits from your trades.
As much as needing a plan, it is also wise to get recommendations from reliable crypto sites. However, not all crypto sites have your best interest at heart. So, while taking suggestions, look critically to ensure you are not just following blindly.
Buying low and selling high
The sole purpose of trading bitcoin is to buy low and sell high, and there is the right way to do it. Most people leave a trade because of FOMO and FUD.
For instance, if you quickly jump into a trade because you saw the price on the day of the coin going up, that’s buying it because of the fear of missing out(FOMO). It will be unfortunate when the value of the coin dropped after you bought it.
When the coin dips consistently, you also sell because of the fear of losing more money in the dip. That’s bad trade. At this point, you shouldn’t sell off, instead you should give the coin some time to see if it will increase again.
To be on the safe side, when buying the coin, ask yourself the following questions: will the price increase last and for how long? Is the price movement in the support and resistance range?, etc.
Always trade cautiously especially if you notice that the coin has reached ATH or has increased more than 10% of its actual price. Analyzing and comparing the best cryptocurrency to invest in is a constant task on top of every trader’s priority no matter how experienced you are.
No exit strategy
This mistake is very common with most bitcoin traders. Most traders do not have a plan of when to leave the market, even when they have made a lot of profit. More often than not, it is because of greed as investors want to bag more profit than they already have.
The exit strategy doesn’t mean you always leave with a profit. It is the moment when you leave the market regardless of making a profit or loss. The cryptocurrency market is very volatile one, so you must learn to leave to secure your profits.
One effective way to plan exiting the market is to set a stop loss order. Another way is to take profit at a certain point. This method is effective if you don’t want to leave the market completely. And lastly, do not let greed take charge, get confident and leave the market.
Not automating purchase
Just the way you automate your stock and shares market, it is also crucial to automate your bitcoin purchase. Most cryptocurrency exchanges allow you to automate your purchase by setting up recurring buy orders.
What most investors do is that they set the platform to purchase bitcoin at a certain amount, once every month. Which means wherever the price of bitcoin drops, the system gets to purchase the coin for them at that price.
Engaging this method makes it easy and less stressful to trade. as they don’t get to monitor the market to buy a currency you think is low or selling at an extremely high price.
Relying on luck
Often people think trading cryptocurrency has to do with luck. Most traders go into the business without even studying how the market works. This is wrong and usually familiar with newbie traders.
You need the skill to trade cryptocurrency successfully, and you have to master the art. You cannot master the art of crypto without neglecting due research.
When researching, ensure to check the right platform. According to the Uk Fraud Alert Service, cryptocurrency scams have increased by 57% every year with investors losing over $113 million. And the majority of these results stems from poor information.
So when researching on the market, take a step back and analyse the information given- if it is true.
Also, before trading with real money, you can practice with a demo trading account. This is helpful, especially if you are not confident with your trading skills yet. Although not all crypto trading platforms offer demo trading.
Conclusion
Bitcoin is a lucrative currency, but there may be some obstacles. The virtual coin has vastly gained more popularity than most coins in the market.
Notwithstanding, trading Bitcoin is risky. So, ensure to consider the risk we have stated in this article and thread safely.
The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision.
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