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  As a newbie or an expert, crypto trading requires utmost care and sound strategies in order to thrive. As a matter of fact, you need to be very careful when trading and as well be schooled, in order to identify certain pitfalls, so as not to crash – and get frustrated in the long run.
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The complexity and the volatility of crypto trading make it difficult to record consistent profits over time. Whether you are trading in stocks, Bitcoin, FX, altcoins, or Dogecoins, the risks are the same. In this article, we shall discuss top five pitfalls we should avoid when trading in bitcoin.
  1. Engaging In Day Trading

The first mistake to make as a crypto trader is by becoming a “day trader”. Becoming a day trader can be enticing for a newbie, because you can close your positions daily, so that you can rest at night, rather than engage in overnight trading. The ease and comfort of waking up in the morning to look at the charts and make a certain amount of money can be attractive. However, the dangers of “day trading” are that;
  1. Bitcoin is a long-term investment that requires all-round trading, because the more you trade, the more money you make.
  2. Day traders spend more time “in the zone”, which can lead to burnout. They burn out because they spend long hours, as much as 8 to 12 hours at least, watching the charts. On the other hand, long-term traders, who trade overnight, can ignore short-term price action and check in on the 4-hour or 1-day candle closes, for example. Therefore, occasional burnout can be mentally and emotionally draining.
  • Day trading costs a lot, because bitcoin requires a longer period of trading to gain more. The shorter timeframe has smaller price ranges.
To this end, bitcoin is a long-term investment that thrives on overnight driving. Day trading is not advisable for newbies and novices.
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  1. Setting Stop-Losses Too Tight

Setting stop losses is when a trader sets up a frame that reduces risks during trading. Setting stop losses can either be flat, tight or too tight, depending on the trader involved. Setting stop losses is a way to manage risk, but when it is too tight, it will lead to far more failed trades. Rather than use the stop losses technique, you can adopt an “emergency stop losses” just in case everything goes out of plan. You must understand how volatile trading is. There are “stop hunts” and “price wicks”, which is designed to get you off the bus. Therefore, it is advisable to use candle closing prices so that you can exit an unfavourable trade.
  1. Going All-In

One of the mistakes new traders make in crypto trading is that they trade with all, rather than trading sum chunks of their total money. For example, if you have $500 limit per trade, it is advisable to trade half of that amount first. As you learn the ropes of trading or if it goes your way, you can then choose to increase your position size to $500. With shorter-term trading, there is also some merit to “scaling” into trades over more than one order.
  1. Going All-Out

Many traders take out all their profits, but it is advisable to take your profits in bits than all at once. It is better to leave some profits, because the market tide can go in your favour. Therefore, it is better to ride the trend.
  1. Taking Massive Positions

If you are using the “risk per trade of positioning sizing”, you might be tempted to take large positions with tight stop-losses. Crypto trading is a marathon, not a sprint. It is advised to use trade-in small portion sizes with wider stop-losses. This can help you earn life-changing money on your big wins, but you will cut your losses big time. Featured Image Source: iStock
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This article was first published on 1st December 2021

nnaemeka-emmanuel

Nnaemeka is an academic scholar with a degree in History and International Studies from the University of Nigeria, Nsukka. He is also a creative writer, content creator, storyteller, and social analyst.


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