One of the most looked into tradable assets today is Cryptocurrency. Even if you were not familiar with the term a couple of years ago, we’re pretty sure that you know or have heard some things about it, which has led you to this article. Why do people lose money when they invest in crypto trading? People easily lose money may it be in the crypto trading scene or not, the challenge is how people manage it in general.
Crypto trading is one of the best “money-making” methods today if done right. In order to avoid failure, we have provided you guys with 5 reasons to look out for and why people are losing money by trading crypto in general.
Social Media Tips
Social Media have become the go-to platforms for communication rendering traditional media obsolete. Naturally, marketing would always go through these channels to keep up with the current information highway traffic. It would be a bad idea to buy coins by following “Tips” given by ICO’s or people that are trying to sell their coins to increase the value of what they have.
In other words, anyone can say that “My coin is better than yours, buy this now before it gets more attention and you might miss the train when prices go up” –a very familiar line that you might have read somewhere online. What they’re trying to do is create a fake “hype” that can end up in disaster. Always do your own researches since you will be spending your own money, keep away from Social Media since this is filled with biased reviews.
– The Bitcoin train has long gone leaving people with doubts on which of the altcoins would be the next big star. FOMO or “Fear of Missing Out” is something that most people today are actually feeling as of this moment! As we all know, BTC has soared up to heights that no one has ever dreamed of when it first came out, leaving a lot of people in awe and dismay that they didn’t buy BTC earlier. This fear of having to experience this lost opportunity again triggers when a price of a coin goes up making people buy at the wrong time (when the price is high) with the fear of it not going back down.
No Precise Trading Strategy
– Going head-first into the world of crypto trading without any strategy in mind is like jumping off from the top of the Empire State building! You will not survive the drop.
– Or “Hold on for dear life” is a term used in the BTC community for people that hold cryptocurrency despite the plunging market prices in the hopes of a recovery in the future. Most of the exchange/trading websites today have a feature called “Stop Loss” wherein you will be able to control the loss of your assets by setting a “safety net” that would stop your loss early and not drag you down to oblivion. Holding on to a coin during tough times can be done as long as you are not losing that much value, but if you bought the coin for a high price and you are way down, better let it go and don’t hold on to avoid any added losses. On the other hand, as mentioned, HODL can be profitable if done correctly and if you bought the coin for a cheaper price than what it is currently holding up to.
Leverage – Not Understanding The Calculations And How Fast They Get Liquidated
Margin trading crypto or using leverage can be devastating if not used properly. How does margin trading work? For example, if you are trading with a 20:1 leverage you get to earn $20 if the price of your trade goes up by $2; but if your investment loses and it goes down $2 you also lose $20 instead of earning when the price goes down. A leverage trade is always expressed as a ratio; for a 20:1 leverage, you will be able to purchase $20 assets with only $1 initial investment.
The most popular saying in the trading world is “Do not ever trade more than you can afford to lose” making margin trading or the use of leverage go beyond the line of betting/trading more than you can afford since you are already in debt the minute you took the leverage. In other words, the higher the leverage the higher the potential income but the greater the risk involved. The use of leverage trading is strictly for advanced traders that know how volatile the crypto market is and if you are not confident in your trading capabilities, then do not touch leverage trading!