Errors of novice traders
The sharp growth of the crypto-currency in the last few years has attracted to the market a lot of inexperienced players who want to get rich just like the lucky ones who invested in Ethereum and other crypto-currencies in late 2016 — early 2017, and multiplied their fortunes several dozen times.
The probability of repeating the same scenario in any currency is certainly there, but in the opinion of Fidcom specialists in the near future it is very small and more like a chance to win the lottery.Investment trading is quite a complicated process, and therefore new investors should be extremely cautious in case of trading by himself.First of all, think over why and for how long you want to invest, because it directly depends on how much time you will have to pay to trade. Medium-term and long-term investment implies the principle of “buy and hold” for a period at least a year and more, whereas in the case of short-term trading, deals can be made hundreds of times a day. Sure, both strategies have the right to exist, but in the current market realities, its prospects and volatility, in our view, the least risky model is long-term investment.Let’s analyze several typical mistakes of beginning investors:
1. Trade by borrowed or last money.
Many peoples invest in trade their last savings or even borrowed funds, in the hope of quick profits. This is not so, crypto-currencies are extremely volatile for many reasons and can both grow by 100% and fall to zero. If investments were your last money, then if necessary, you will be forced to reduce your portfolio at a loss and it will not be possible to restore it. Invest only what you don’t need in the near future or what you are ready to lose.
2. Don’t store all eggs in one basket.
In the world of crypto-currency, this principle is particularly relevant, since few people can 100% identify and calculate any real financial indicators of a project and, accordingly, make the right choice. Diversification of the portfolio is mandatory, including on different wallets and exchanges!
3. Fear of loss.
No one can choose exactly the right entry point. The probability of drawdown of your portfolio exists always, and you should be ready to endure it if you believe in your choice, rather than rush to sell and buy those or other assets. Set a tolerable level of drawdown for yourself and monitor it. At the same time, the level of tolerable losses must be determined with due regard for the duration of your investments. The longer the term, the greater the drawdown you must afford to endure. If you have made the right choice of asset, then don’t worry, because in time the price will be much higher.
4. Crowd effect.
Remember that the crowd is often irrational, but it is who, with the exception of individual cases, forms a trend on the market. Watch the trend, but don’t follow it thoughtlessly. Always analyze what is happening and make a decision based on clear facts. If you see a sharp increase in one crypto-currency, think carefully, maybe it too late to invest in this asset. After selling your assets that have not yet grown up and then invest it in a rapidly growing “promising” currency, you can suddenly lose everything when the explosive growth stops and the price goes down. Just as you don’t need to quickly drop your falling assets, the situation can change dramatically, and you will lost again. Form a diversified portfolio and wait for the growth of your assets.In fact the list of errors is much more. There are a lot of nuances in investment trade, let alone such a new non-regulated crypto-currency market. Only you can choose the appropriate way. Through trial and error, having lost several of the capitals and deposits, you will learn how to trade on your own or you can entrust this business to Fidcom professionals.
In the next article, we can more closely analyze the errors described above, talk about other nuances of trade, or, for example, tell about common ways of manipulating the market and how to not get caught.
Let us know in comments!
Excellent article!!!
Thank you, we will try.
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