Millions of Americans are buying into bitcoin as a means of making easy money. Like any commodity, digital or otherwise, price fluctuations can quickly turn profits into losses. Even bitcoin has experienced several large price drops over the past several years.
So what are some common bitcoin trading errors? We’ll highlight six of the biggest mistakes people make when trading with bitcoin so you can avoid those financial missteps.
1. Lack of Preparation
Would you buy $5,000 work of stocks without bothering to research the company you are investing in beforehand? The same approach should be used when investing in cryptocurrency.
Failing to do research could mean that you buy a digital coin right when it is about to crash. The signs of overvalued cryptocurrency are often discussed in financial publications days and weeks before a crash.
2. Picking the Wrong Bitcoin Service Provider
The bitcoin trading platform that you use to buy and sell digital currency matters. With minimal regulations, pretty much anyone can create a platform for trading digital coins, and not everyone is to be trusted.
Picking the wrong provider could mean that you do not have access to certain coins or that you end up paying unexpected fees following transactions. Do some research and trust online reviews when they paint a consistent picture.
Similarly, you want to be careful when choosing a bitcoin wallet.
3. Spending More than You Can Afford
Investing should never place your personal finances or retirement in jeopardy. Put in what you can comfortably afford to lose. If the thought of losing money suddenly stresses you out, there are other forms of investments, like bonds, that offer a predictable return on investment.
4. Not Sticking to Your Plan
Once you have done your research, the best course of action is often to buy your digital coin of choice and then to step back and wait. Your plan may be to leave your money in until you retire in several years. Or, you may decide that once certain bitcoin trading profits are met, you will sell your stock.
Once you set your bitcoin trading strategy, stick with it. One of the biggest mistakes that bitcoin traders make is not sticking with their plan.
5. Letting Emotions Get in the Way
Computers generate new coins every day. Part of the fun of being a digital currency investor is being a trailblazer who is on the hunt for the next big thing. Investments, though, shouldn’t be based on emotional decisions.
Another way that emotions get in the way of investing is during price drops. Declines in value are a part of any investment effort. A price drop should not leave you wanting to cash out by looking for “bitcoins atm machine near me.”
If you are tempted to sell simply based on fear, you should consider ignoring market changes or consider another form of investment altogether.
6. Following Bad Advice
There’s no shortage of trading advice out there, and much of it is bunk. Some people even give advice for self-serving purposes. Do your own research and only read credible publications.
Learn More Bitcoin Trading Tips
By understanding common Bitcoin trading errors, you can avoid them. Cryptocurrency values are on the rise, and a little bit of research can go a long way toward helping you profit off bitcoin.
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