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In spite of the fact that investing in general and crypto trade in specific may provide enormous gains (more than that monthly or weekly as someone makes annually), the vast majority of investors ultimately lose money. Without any data at all, it's clear that everyone participating in retail trading of cryptocurrencies, equities, or Forex drives a sanctified "Lambo" and lives in opulence.
Most individuals, however, lose money in the market rather than gain from it, increasing their wealth and the standard of life for themselves and their families.
In this piece, we'll discuss and evaluate the causes of why the vast majority of traders incur huge losses or even wipe out their whole accounts at some point in their careers. Consistent losses that occur even when market circumstances are favourable are meant by this word, not the temporary losses that all traders inevitably experience during losing streaks or sudden market swings.
Keep reading to find out why the majority of cryptocurrency investors incur losses and how you can act to avoid their fate.
Guidelines for Social Media
The widespread use of social media has made conventional news outlets obsolete. The present information superhighway traffic demands that marketing constantly flow via various channels. Do not acquire coins based on "Tips" offered by initial coin offerings (ICOs) or those seeking to sell their coins at a higher price.
To put it another way, it's easy for anybody to write, "My currency is better than yours, get this now before it gets more attention and you could miss the train when prices go up" (or something similar). They're attempting to generate phoney excitement that might lead to catastrophe. Since you'll be paying your money, you should always perform your investigation instead of relying on the evaluations posted on social media, which may be very biased.
When You Put Money Into Learning, You Get The Highest Return.
Like any other highly specialized field, learning the ins and outs of cryptocurrency trading is a time-consuming and information-intensive process before one can begin attempting to benefit from studying the wildly fluctuating market. But unlike most other professions, you won't need a degree to open an account and begin competing with thousands of professional currency speculators across the globe. There is no entry barrier anybody with access to the internet can open an account on NFT profit or another popular cryptocurrency exchange site, deposit a starting balance, and begin trading immediately. If you are interested in becoming a cryptocurrency trader, at a minimum on paper, you don't have to invest 4 years in school studying the art and then maybe another year as an apprentice acquiring invaluable knowledge you can do it in only a few keystrokes.
Eventually, however, everyone realises that trading is no better than gambling if one does not have a solid foundation in the subject. Where, therefore, does one acquire such wisdom? One may either educate oneself, attend classes provided by an agency or independent traders, or locate a mentor who has been through the trenches and is prepared to teach what he or she has learned.
FOMO
The Bitcoin hype train has long since passed, leaving investors uncertain as to which cryptocurrency will eventually rise to prominence. Nowadays, most individuals are experiencing FOMO, or "Fear of Missing Out." Bitcoin's meteoric rise has left many investors stunned by its incredible success and wishing they had gotten in on the action sooner. When the value of a cryptocurrency goes up, investors panic that they won't have another chance to buy low for fear that the price would never drop again.
Lack Of A Detailed Trading Plan
Like leaping from the Empire State Building, diving headfirst into crypto trading without a plan is a bad idea. You can't fall and live. Here are some tried-and-true methods that may be used to enter the exciting world of trading and perhaps turn a profit:
Holding
If you know what you're doing, HODL can turn a profit. Purchasing at a cheap price and riding it until you reach a point where you believe you can no longer profit from doing so. It's like going into space on a rocket and jumping off just before it explodes!
Get In On The Bargain At The Low Price
Buying at a lower price is one of the world's oldest investment ideas. Investing while prices are low usually results in a quick profit when the market turns around and the price goes back up.
Trading Strategies That You Can Copiously Copy
A novice trader might benefit by seeing copy trades and comparing their performance to that of other traders. To clarify, we mean to imply that there are now copy trading options available on trading/exchange websites.
One of the most prevalent order types is the stop limit order, which may be quite useful in Bitcoin trading methods.
Carefully Consider Your Trading Strategy And Period.
Think about your trading approach and the period span you'll be using the method. The amount of time you may spend daily checking and evaluating the charts is something you should be aware of. Trading cryptocurrencies, for instance, requires the trader to stay attached to the screens for nearly the complete lifespan of the day, making it very impossible to become a successful day trader or scalper if the trader also has a traditional 9-to-5 job.
However, day trading may not be for you if you tend to act hastily and lack patience in general. Given that the highly unstable crypto is rife with opportunities to purchase breakouts as well as trade equipment failures, a trader with these personality traits may find themselves constantly chasing prices rather than sitting tight and waiting for them to settle. If that happens, it's time for the trader to take a breath, move up to a higher period, and rethink his approach.
HODL
In the Bitcoin ecosystem, those who continue to retain bitcoin despite the falling market prices are known as "hang on for dear life" The "Stop Loss" function, available on the majority of trading and exchange platforms these days, allows you to limit the amount of money you stand to lose by establishing a "safety net" that will kick in if your account falls to a predetermined threshold. If you acquired a coin at a high price and its value has dropped significantly, you should probably sell it rather than risk more losses by holding on. However, as was previously noted, HODL may be lucrative if done properly and the currency was acquired at a lower price than it is presently holding.
Leverage
Cryptocurrency margin trading and the improper use of leverage may have catastrophic results. Please explain the mechanics of trading on margin. If you're trading with 20:1 leverage, for instance, every $2 price increase results in a $20 profit, while every $2 price decrease results in a $20 loss. Any monetary transaction involving leverage is denoted by a ratio for example, if the leverage is 20:1, the investor may acquire $20 worth of assets for just $1.
In Conclusion
Trading's golden rule is "Never invest greater than you have to lose," but margin trading and leverage push that limit beyond the point of no return since the trader is already buried in debt. Simply said, the larger the leverage, the bigger the profit potential, but the higher the danger. Cryptocurrency markets are very volatile, making leveraged trading risky for anybody except the most seasoned professionals.
Related: PAMM And MAM: The Best Managed Accounts for Your Forex Trading Journey