Op-Ed by Danielle Davis
We all make mistakes
When learning a new skill, we always make mistakes, this is part of the learning process. Mistakes can be great learning tools, but some common mistakes can be learned the easy way. Reading this handy guide will help you avoid the most common mistakes that are made.
These mistakes are not unavoidable. Put in the time, there will be plenty of other ways for you to learn money.
Just a little effort in educating yourself will go a long way, and it can really save you from a lot of losses. These mistakes may feel small, but one (or more) can wreck you faster than you think.
Top 5 Mistakes of New Crypto Traders
- Risk Management
- Emotional Trading
- Fee Management
- Changing Strategies
- Asset Types
Managing risks helps you determine how much you should spend per investment, and should be your first step to Diversification. It may feel overwhelming when you hear about the thousands of different tokens being promoted, and all of them may sound like great investment.
You certainly can throw a little money at each, but I can tell you now, it’s likely not going to end well. Spending a little time to figure out how much risk you’re willing to take in your portfolio will help you make decisions on what to allocate to, without compromising your bottomline.
Most of us know well, if we let our emotions take hold of the purse’s strings, we’ll find 10+ Amazon boxes at our doorstep within 2 days.
Trust me, this will be harder than you might initially think. Keeping control of our emotions in the markets is incredibly hard, after all, there is so much at stake.
But how do you actually do that? It takes a lot of willpower to train yourself to do the opposite of what your emotions are telling you to do.
When an asset pumps and everyone around you gets rich, you really want to be a part of that, you buy in late or even at the top hoping you’ll get away with it. But then it crashes, you get upset, and often will sell at a loss to make it stop.
3. Fee Management
FEES! Ah, I have to say this one really did me in personally. When I started, I had so many small orders here or there, buying and selling without taking into account fees whatsoever. I wasted so much!
There are many exchanges, with different selling points and assets listed, and most importantly different fee structures. Make sure you optimize your strategy to get the most out of each platform.
Uniswap is the newest popular exchange because unlike others, its not really an exchange. It’s a fully decentralized, automated protocol to provide liquidity for, and “swap”, Ethereum based (ERC20) tokens.
Transactions happen between user wallets and automated liquidity pools without any intermediaries; there is no orderbook, there is no authority deciding anything in between. So it’s easy and cheap to deploy your token, and get money for your project with it right away.
But because they don’t operate like traditional exchanges, their fees structure is also very particular:
- It runs on Ethereum so Gas fees apply.The actual use cost of Uniswap will depend on the cost of transactions on Ethereum at that time.
- Slippage fees depends on the amount of liquidity present in the pool you trade against. This is a bit more complex to explain – find it here.
4. Changing Strategies
Another enormously common mistake is changing strategies like you’re betting on horses on a racetrack. Before you jump in, someone should tell you that changing strategies all the time, or worst, according to market fluctuation without stop losses, is the fastest way to lose your money.
Most of all trades are losses. You have statistically a far better chance of profits by sticking to a plan.
5. Asset Types
Speculative trading is very difficult, and the addition of the word “crypto” implies but does not explain, a whole lot of other layers of complexity that a veteran would want to take into account.
Many people in crypto have gotten in on the hype and follow whatever seems to be pumping at any given moment.
Be sure to do your research on what the asset actually is (currency, utility token, security token, etc.) because the way it’s valued & priced directly depends on it – other than hype.