Do you plan to start trading with Bitcoin?
The current cryptocurrency market is at $1.49 billion, growing to almost triple the value within the next decade. It is an attractive investment, but the lack of knowledge will be your downfall.
Sometimes, getting the most out of your return on investment is knowing what to avoid. In this guide, we will discuss common mistakes in trading Bitcoin. Read on and learn what not to do:
1. Investing in What You Do Not Understand
It is critical to understand what you are getting into before investing. When you are buying and selling Bitcoins, it is best to do your research. Study how it functions alongside its blockchain network.
The knowledge allows you to have an idea of how this specific cryptocurrency progresses. It is better than listening to people riding the hype.
2. Following the Wrong Advice
Another common blunder is following advice from social media or Bitcoin forums. Worse, they follow people with no authoritative reputation. Some of these individuals like talking about the coins they hold.
When you take advice, ensure it is from experts like Byte Federal. Never trust strangers hiding behind anonymity or pseudonyms. Sometimes, they are part of a pump and dump scheme.
3. No Diverse Holdings
As a beginner, it is best to diversify your portfolio holdings. Bitcoin has a solid value, but market volatility can still affect it. To reduce your market risk, invest in various digital assets.
Diversifying your portfolio is as easy as splitting currency percentages. Start with 40% Bitcoin and 20% Ethereum. The rest can be altcoins and small-cap coins.
4. Searching for the Next Big Hit
Looking for the next Bitcoin will always negatively impact your Bitcoin trading strategy. With thousands of digital currencies available, investing in every variant is impossible. Limit your portfolio to promising cryptocurrencies, especially those with real-world value.
5. Neglecting an Investment Plan
Without a clear investment plan, you will have no idea how much to invest. You must consider whether to use a lump sum to invest in one go or use part of your income as a monthly investment. A plan also allows you to determine your profit targets and limits before cutting losses.
For example, you decide to buy Bitcoin and sell it before its value increases by 10%. However, your best bet is to sell it before then. Do not wait around since you might end up losing instead.
6. Refusing to Stay Updated
News and updates often affect cryptocurrency prices. When you do not follow updates, you will not be aware of price changes. Pay extra attention to regulation updates and large-scale exchange hacks.
Avoid Mistakes in Trading Bitcoin Now
These are some common mistakes in trading Bitcoin. Always study what cryptocurrencies are before buying and selling bitcoins. When you do not understand your investment, you cannot make informed decisions to maintain profit.
However, Bitcoin is only one of the many cryptos in the market. Consider investing in other coins for a diverse portfolio.
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