Are you fed up witnessing your hard-earned money vanish in the erratic world of crypto trading? Many investors lose money on risky bets because they need help to figure out the ever-changing and complicated world of digital assets. Have you ever been on a trend of constant losses and asked yourself; how do I stop losing money on crypto? Losses are bound to occur at a point in time for someone who trades on a regular basis. However, do not despair - you can effectively stop losing money on crypto by using safe storage platforms, tracking crypto indicators, doing proper background research, and sticking to the fundamentals.
There are several schemes you can embrace to minimize the losses and make better choices. This in-depth article will examine the typical traps that result in monetary losses in cryptocurrency trading. Also, we will dish out some helpful advice on how to avoid them. It is not news that the most common error made by crypto trading beginners is to enter the market without having a firm grasp of it.
Even experienced ones find it challenging at times to prevent loss of funds. Do not panic further; we will take you through how you can evaluate different cryptocurrencies to make sound data-driven decisions instead of assumptions. We would also divulge critical things to make you a more effective cryptocurrency investor who barely loses funds. You may stop losing money on cryptocurrencies and start accumulating a more profitable portfolio with the appropriate information and approach. First, let us highlight why you can’t stop losing funds while trading crypto.
Why You Keep Losing Money in Crypto
The appeal that comes with cryptocurrencies, alongside the promises of quick wealth and financial independence, is a significant factor that shaped the influx of investors worldwide. However, this journey into the world of virtual currencies has proven challenging and expensive for many in terms of losses. Anyone hoping to navigate the turbulent crypto markets more skillfully will need to comprehend the causes of these losses in an in-depth manner.
Ignorance of the market dynamics can be attributed as one of the main reasons people find it challenging to profit from cryptocurrency. Without correctly understanding a coin or token’s purpose or long-term sustainability, many investors are seduced by the enthusiasm and perks surrounding it. Because of this ignorant nature and false/inadequate information, bad investing decisions may come into place.
The frequency of fraud and scams in the cryptocurrency ecosystem is another essential element causing unhinged losses. Although cryptocurrencies have an edge when it comes to security and anonymity, the decentralization eases operations for fraudsters and con artists to penetrate. In the industry, phishing and Ponzi schemes are common. These market manipulations entice gullible investors who might end up as victims of financial fraud.
Furthermore, a significant cause of losses for several traders and investors is the tremendous volatility of digital assets’ values. In the markets, price swings on a 24-hour scale are not unusual, making it challenging to forecast and profit from price moves. Additionally, the absence of proper regulation exacerbates price volatility, leading to significant losses for traders.
Finally, another primary reason why individuals keep losing money on cryptocurrency is purely psychological. As the popular saying goes thus, “human wants are insatiable.” The desire for rapid financial gain or the fear of missing the next great opportunity can impair judgment and cause hasty behavior. Furthermore, cognitive biases and impulses can further skew perceptions and result in bad investing decisions.
Best Strategies to Avoid Losing Money In Crypto
Now, you have seen why losing while trading is unavoidable. However, do not limit your mindset to that. There are ways to go about this, and we will discuss them in this section. You should have a knowledge of six key strategies that would guide you against predetermined losses. Further details on how to navigate through these valuable strategies will be discussed, so follow us as we proceed.
1. Do Not Invest More Than You Can Afford To Lose
It is essential to know how cryptocurrencies work; i.e., these digital assets are still relatively new, making them volatile enough to witness large daily value fluctuations. For many in these markets, opportunism and skepticism persist despite the long-term optimistic tendency. Because of this, you should follow our first rule of investing, which says only invest money you are willing to lose. This is highly critical because the market could be unstable, leading to an event where it steadily declines.
For a trader, before investing in cryptocurrency, ensure you have enough money saved in anticipation of emergencies. It would be a terrible situation to pump in almost all your savings into the crypto market and lose it all. When the time comes to invest, make sure no more than 5% of your wealth goes into it. This is sufficient to reduce the effect of losses on the portfolio and increase exposure to possible gains.
2. Do Proper Research and Stick to the Fundamentals
Several indicators are used to vet cryptocurrency investments compared to the stock market. These sometimes involve analyzing the likelihood of real-world adoption, reviewing technical specs, observing community involvement, analyzing the developers, and assessing rivals. Give preference to projects that are tried-and-true or that have unique features that are difficult to imitate and have the potential to be widely adopted.
Also, ensure you watch out for investments with no real fundamentals based only on conjecture. The use of the token, transaction speed and scalability, network security, team transparency, and the token's advantages over rival cryptocurrencies are all essential research foundations.
3. Make use of Safe Storage Platforms
If you are in possession of extensive cryptocurrency holdings, you can keep them off exchanges for a while by storing them with a reliable cryptocurrency custodian such as Plasbit to avoid hacks. We offer additional security measures like regular and automated penetration tests, withdrawal confirmations, two-factor authentication, offline storage, encryption technologies, and 24/7 surveillance.
You can store your recovery phrase in a secure location, such as a bank vault or locked room, for more safety. Avoid keeping it in an electronic format due to susceptibility, but if it is, encrypt or password-protect it. Finally, when entering sensitive wallet info on devices, exercise caution and create one-of-a-kind passwords.
4. Apply the Dollar-Cost Averaging Rule
In the crypto market, applying dollar-cost averaging is a brilliant move. Doing such enables you to make modest and regular purchases on a predetermined timetable. This could come on either a weekly or monthly basis. For beginners, investing a certain sum of money on a regular basis, regardless of share price, can be referred to as dollar-cost averaging.
Going further, rather than making each purchase individually, it is advisable to automate these through an exchange. You can progressively establish a position utilizing dollar-cost averaging instead of succumbing to the idea that you must regularly time market tops and bottoms.
Consequently, buying relatively more digital currencies when prices drop and less when they rise will mitigate the impact of volatility. In the long term, it is frequently beneficial to pay a little bit more in transaction costs. When the market has a substantial decline, you may also consider making opportunistic additional purchases on occasion.
5. Do Not Forsake the Major Crypto Currencies
It is common knowledge that well-known cryptocurrency such as Bitcoin has a huge market capitalization. This is because of its association with a notable number of financial components created alongside it, including exchange-traded funds (ETFs). What do we mean by exchange-traded funds? They are funds that follow a specific index and are traded on exchanges.
An advantage: Purchasing and selling various assets during market hours through an exchange-traded fund can help diversify your portfolio and reduce risk. These well-known coins have survived numerous notable market downturns and cycles. More prominent cryptocurrencies, as opposed to more recent or smaller-cap coins, have typically shown their durability, even though risks still exist.
If the opportunity presents itself, think about shifting the focus from huge asset profit-taking into more promising, recent ventures with practical applications. Relative to the size of your whole investment portfolio and risk tolerance, try not to significantly ignore substantial cryptocurrencies, just as you would with any other asset.
6. Track Crypto Indicators to Enhance Decision-Making
Although the volatility of cryptocurrency makes precise forecasts impossible, reliable technical indicators can offer insights. Momentum shifts, for example, may be detected via simple moving average crossovers. It is also crucial to pay attention to new, crypto-specific metrics like addresses by time held, average transaction fees, and on-chain activity.
You can time your inputs and exits properly by evaluating indicators. Integrate blockchain-based and technical analysis for a more expanded picture of the scenario. Also, always keep an eye on the big picture rather than responding to short-term fluctuations in pricing.
Common Mistakes Made When Trading Crypto
Trading in cryptocurrencies has gained a high degree of popularity in recent times. This phenomenon has succeeded in drawing several traders from almost all backgrounds. This trend has also been heavily influenced by how decentralized the whole structure of cryptocurrency turned out to be as well as how attractive the rapid profits are.
However, if contrasted to other kinds of trading, crypto traders also face specific difficulties and risks. We will discuss several common mistakes cryptocurrency traders make in this area, and why a significant portion of them occur.
- Going all in without proper research: One of the biggest blunders traders make is investing in cryptocurrencies before fully comprehending how they operate. Beginners may find it challenging to comprehend blockchain technology, the underlying technology powering cryptocurrency. Understanding the fundamentals of blockchain technology, the operations of various cryptocurrencies, and the variables influencing their pricing is crucial. Make sure you fully comprehend how it operates before deciding to put money in it.
- Emotional Trading: Feelings can impair reason and cause rash actions. Typical feelings, such as fear of missing out (FOMO), could cause traders to make irrational decisions. It's critical to trade without regard to emotion and instead on reason and analysis. As a trader, if you believe that crypto offers a quick path to financial gain, you may end up with regrets. One strategy to stop this is establishing and following an intelligent trading plan.
- Overleveraging: Overleveraging is the practice of traders taking on more debt than they can bear to increase their position in the market. Applying leverage is valuable for increasing earnings, but it could lead to significant losses if the market forces are against your play. Many people ignore this weakness, making it difficult for them to stabilize when things go wrong. A wise tip; use the leveraging tool cautiously by investing only the funds that you can afford to lose.
- Ignoring Risk Management: Cryptocurrency trading is a scheme that requires careful consideration of risk. Traders tend to ignore risk management because of the potential they see in the markets. By the time reality dawns, you may end up asking yourself repeatedly: how do I stop losing money on crypto? By using risk-management tools and stop-loss orders to limit losses, you can properly position your ability to control risk. Another way to go by it is widening the base of your holdings and avoiding slotting all available funds in a location.
- Bypassing Security: Given the prevalence of fraud and hacking in cryptocurrency, top-notch security is crucial. To increase security, you should utilize trusted platforms such as Plasbit. Ensure you store your cryptocurrency in offline or cold wallets and enable two-factor authentication for login procedures.
Major Risks in Crypto Trading and How do I stop Losing Money on Crypto
In this section, we will highlight the significant risks associated with crypto trading and discuss how to mitigate them to stay on the safer side.
1. Risk of Hacking
Trading cryptocurrency has numerous benefits, but there are drawbacks as well, one of which is hacking. Because cryptocurrencies are digital, hackers can easily take advantage of weaknesses in trading platforms, wallets, and exchanges. Security precautions could be taken over by hackers, granting them illegal access to exchange accounts and wallets. The implication of this action is taking money that can never be recovered.
Furthermore, hacking incidents may cause the cryptocurrency market to lose trust, leading to instability and price fluctuations. As a trader, you should utilize trustworthy exchanges and wallets, turn on two-factor authentication, and upgrade your security measures.
2. Volatility
It is often known that cryptocurrency markets are incredibly volatile. Prices can change drastically and fast, resulting in significant profits or losses. Events related to the macroeconomic environment, legislative changes, and market speculation can all intensify this volatility.
In this market, it's not uncommon for cryptocurrency values to spike one day and then fall the next. This is not the place for you if you feel uneasy taking on market risks. As in the stock market, prices will rise and fall, but they usually do so more quickly for digital assets.
3. Liquidity
One less well-known yet sneaky threat associated with cryptocurrency trading is liquidity, which allows you to enter and exit the market without affecting the price. Even if you find a cryptocurrency project that interests you, the market price will need to rise in order to draw in more sellers if there aren't enough buyers to match your purchase quantity. If, however, you are seeking to sell a large investment, the price of the cryptocurrency will have to decline since you need sufficient liquidity to cover your position.
More prominent and well-known cryptocurrencies, like Ether or Bitcoin, typically have more liquidity. On these large-cap cryptos, this makes it easier to open and close big trades. On the other hand, there will be fewer liquidity pools available for altcoins and cryptos with smaller market capitalizations. Because of these smaller pools, prices could fluctuate significantly when big orders join the market. Dividing large deals among several traders of lesser quantities is a common strategy to get around possible liquidity limitations.
4. Lack of Proper Regulations
Sadly, crypto regulatory agencies and governments are almost everywhere and are still learning how to regulate the market. Cryptocurrency laws have been declared illegal in China and India, but some nations, like El Salvador, are fully committed to the cryptocurrency space and have made Bitcoin a legal tender. The majority of markets fall in between these two extremes, and the US, UK, and Canadian governments in their own stead are still debating how best to regulate cryptocurrencies.
With all these, you might want to ask yourself the following; “How do I stop losing money on crypto because of these unstable regulations?” “Is it better to approach these digital coins like financial assets or like a currency similar to the dollar?” A one-size-fits-all approach can be misguided because various cryptocurrencies have unique features and objectives, necessitating diverse regulatory approaches depending on the circumstances. This is a complicated scenario that will keep many traders away until the murky waters clear.
5. Decentralization
For many crypto enthusiasts, decentralization is a crucial feature. The move to eliminate middlemen such as financial service providers has proven to be valuable. Because of that step, traders can now save transaction costs and accelerate processing times. A worldwide network's validation of data enhances the security of blockchain systems. Despite these benefits, decentralization has its drawbacks.
The fact that votes and consensus are used to govern truly decentralized blockchain networks among a worldwide community presents a number of possible issues. Changes to a blockchain's technology may not be well received, which could postpone or even prevent beneficial or absolutely essential adjustments. Malicious groups may eventually enter communities and seize power. The voting systems themselves might be imperfect, allowing a different kind of hacker attack that targets the blockchain’s steering community.
6. Market Manipulation
Finally, the crypto market is prone to manipulation by powerful entities or trading gangs. Pump-and-dump scams are widespread, in which a cryptocurrency's price is artificially boosted before being dumped for profit. Before making any crypto trading activity, be cautious of these schemes and do extensive research on what your eyes are glued on.
Why Plasbit Is The Safest Platform To Keep Your Crypto Funds
Plasbit's strong security features and steadfast dedication to customer asset protection make it the safest platform for securing your cryptocurrency coins. Modern encryption techniques are used to guarantee the security of all transactions and user data.
Furthermore, the platform protects against online hazards like viruses and hacking by keeping the majority of its cash offline in wallets known as "cold storage," which are inaccessible via the internet. To continuously monitor and enhance its security procedures, we also hire a group of experts and perform security audits on a regular basis.
Plasbit presents itself as a dependable and trustworthy platform for managing your cryptocurrency investments because of our emphasis on security, transparency, and user safety. In contrast to others, we offer real-time, personal customer care around the clock to make sure users have all the assistance they require. If issues come up, our knowledgeable customer support staff will give you their full attention in order to solve the problem and provide the best possible experience.
Conclusion
Now, can you trade on the crypto market without losing significant funds? Yes, you can by avoiding some common mistakes that have huge adverse effects. Trading on crypto comes with several risks and a lot of traders still find it difficult to retain their profits. Aside from the gains being recorded, some are even losing enormous capital due to the market’s tricky nature. So you don’t need to bother yourself anymore with how do I stop losing money on crypto? With effective risk management strategies, as we have highlighted, you can capitalize on trading opportunities to minimize loss and achieve profitability.
