The digital coin known as Ether hit record highs in 2021. This is the digital currency that is linked to the Ethereum blockchain. The interest in cryptocurrencies has increased dramatically in the last year, with major companies and institutions becoming more interested in the world of crypto.
The best-known cryptocurrency, Bitcoin, also hit record highs in 2021. It reached $63,000 in April, an astounding rise from where it hovered in 2016: around $400.
Are you interested in hopping on the bandwagon and getting into crypto? If you’re interested in Ether, there’s a lot you’ll want to know before you get started.
Sometimes knowing what not to do is more important than knowing what to do. Let’s take a look at some of the common Ethereum trading mistakes.
1. Risking More Than You Can Afford to Lose
No matter what you’re trading, it’s essential that you don’t put more money at risk than you can stand to lose. This means that you should really avoid doing things like putting your last $2000 into crypto with the hope that it will earn you the big bucks. While it would be great if it worked out, you have to remember that there’s also a chance that you will lose all of it.
No matter what your Ethereum trading strategy is, make sure that you are playing with money that doesn’t need to go to essentials like housing, food, or utilities. When you’re trading out of necessity, you’re a lot more likely to make a mistake in your entry and exit point. This is because emotions are a big part of any type of trading, and having the situation be pressurized by desperate need can lead to fumbling.
2. Falling Prey to Fear of Missing Out
Probably the easiest mistake to make when trading with Ethereum is to buy in once you’ve seen that it’s risen a significant amount. While it might work occasionally to chase pumps in the price, most of the time you’ll probably end up hurting. When something has already shot up a ton, you need to be aware that it’s possible it’s about to top out and dramatically tumble back down.
It’s a very human instinct to not want to miss the money-making party when you see Ethereum or any other crypto mooning. However, you always need to step back and analyze the situation. If you’re too late it’s better to sit this one out and find a better entry point rather than jumping in on a whim.
3. Not Doing Your Research
Before trading Ethereum, you’ll want to learn about different types of cryptocurrencies, what cryptocurrency even is, and the basics of trading. While your buddy might actually be giving you a hot tip that will make you a millionaire, it’s generally a bad idea to take other people’s investment advice without looking into it yourself.
4. Not Being In Control of Your Emotions
Emotions are a huge deal in trading, whether it be cryptocurrency, securities, ETFs, or futures. Honestly, this point cannot be overstated. If you are thinking that you won’t fall prey to your emotions when you’re trading, then you’re probably not ready to trade.
Greed and fear can drive you to make the worst kinds of decisions when trading. Your entries, exits, and overall trade management can start going haywire when you let your emotions take control of the process. All successful traders learn to master their emotions, and it’s best to figure this out sooner rather than later so you don’t blow up your account revenge trading, or being unwilling to take a loss when the time is right.
5. Quitting Your Day Job
Do you have a knack for buying Ethereum and profiting when you sell? Is your return on investment changing your life? That’s great, congratulations, but be very, very wary of quitting your day job.
This has to do with trading psychology again. You might be awesome at trading when you are doing on the side of your regular income. If you quit your job, though, it puts a lot more pressure on you to minimize losses and maximize gains, and this is a recipe for spazzing out.
If you’re going to become a full-time trader, make sure you have some savings set aside and a plan B if it doesn’t work out. To trade full time, you really need to have a sense of peace, and being stressed about making rent in a few days isn’t going to lead to good decisions.
6. Not Diversifying
In trading Ethereum the old adage rings true: don’t put all your eggs in one basket. It’s always a good idea to protect your risk by having your investments spread between multiple assets. If you’re going the cryptocurrency route, it’s often recommended that you own at least five different cryptos.
7. Seeling Prematurely
When you’re first starting out, it’s easy to sell moments after you buy when you see that you’re losing money. While buying and selling quickly is what day trading consists of, it’s not a good strategy if you’re trying to invest for the long term. Do some work to understand the cycles and patterns of markets before you choose to invest in anything, otherwise, you’ll get scared by a little drop in the price.
Avoiding These Ethereum Trading Mistakes Is Crucial
If you’ve got friends, colleagues, or family members that have made money on the recent stock market rise or cryptocurrency boom, it’s totally reasonable to want to get in on the action. That being said, these are risky games that you need to take seriously. While the euphoria of gains is absolutely incredible, it pales in comparison to the agony of serious losses.
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