Here are the five common pitfalls when day trading crypto
- Trading by FOMO and FUD Fear of missing out (FOMO), as well as fear, uncertainty, and doubt (FUD), have brought huge losses and possible gains. These are psychological tricks in the crypto investment world; investors, mostly novice traders, who get swept out by these suffer investment loss due to selling out their coins at lower prices or buying too much that they cannot handle. Trading on emotions and guts opposed the aim of day trading technical analysis. This is why news trends should be followed for updates but do not pay too much thought, and attention to opinions posted on blogs, forums, or even SNS for the crypto market cannot be accurately predicted by anyone; instead, focus on your investment plan and strategy.
- The wrong tools Trading platforms and exchanges, crypto wallets, trading bots, and all other crypto tools are all designed differently, thus conduct research, then choose which options can provide you with the best benefits, best securities, and are also well-fitted to your finances and aims as well. A great option for beginners is Bitcoin Era.
- Locked in a position Being locked in a position in a day trade is highly possible but can also be avoided. Being locked in a trade position is being unable to exit trade positions; keep in mind that it is much easier to enter trades, but it is much harder to exit when you need to and want to. This is because of the liquidity of crypto; you cannot just exit a trade just because you gained enough profit; take into consideration the current liquidity of the crypto you are trading; if it has lower liquidity, you might just be surprised by the losses you accumulated since it is harder to get the price you expect to get in crypto which is illiquid. Thus liquidity of a crypto market shall be taken into consideration when choosing what crypto to make day trades in. Choose crypto which has sufficient liquidity and is currently actively traded so you can maximise profits.
- Overemphasising technical analysis Be mindful of technical analysis but be sure not to over analyse; this can result in the inability to see what is beyond the charts. If you get too much stuck on the charts, you can miss out on news which can result in extreme fluctuation in the market prices, since news can affect market prices for it can shake up the minds of many beginners and the crypto world has a lot of newbies. To lessen the risks and avoid this, you just have to be more sensible. Do keep your eye on the news while at the same time taking the chart analysis in mind before entering a trade position, especially since day trades have a lot higher risks than other trade strategies; thus, you have to keep your mind on track and do not be swayed by the news and the charts too much.
5. Not analysing the correct spread.
Since all the data you need in a crypto market is out in the open, have some effort and analyze this data. Most traders will look into the order book to decide which position to take and what transactions to do, however, do not mistake the numbers you see in the order book to be the profit you will get when you make the same trades listed. Always remember that the order book will always display the lowest price that someone will sell an asset and the highest price that someone will buy it, however here is the thing: that does not mean that you can sell some of the amounts that you desire for that price. Actually, the amount of any given asset that users are happy to buy and sell at the top of an order book is usually much smaller than you want them to be. All investments have their pitfalls; the success of your day trades all lies in countering these pitfalls with the correct strategy planned out.
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