4 Mistakes You’re Making When Cryptocurrency Investing
Cryptocurrency trading is the easiest way for people with no investment experience to make a lot of money in a short amount of time. On the flip side of that coin (or crypto-coin, if you will), it is also the easiest way for inexperienced traders to lose a significant amount of their investment in little to no time.
Here are the 4 mistakes you’re making when cryptocurrency investing:
Table of Contents
#4. Your Diversification Sucks (& Why You Need to Diversify)
Diversification of assets is how the successful traders separate themselves from the unsuccessful ones. These successful traders know exactly how diverse their portfolio needs to be in order to have the best risk/reward payoff. This is something that most amateur traders do not have. Instead, they either do not diversify their portfolio nearly enough, frequently putting all of their funds into Bitcoin or Ethereum, or they diversify too much, spreading themselves so thin that any positive breakout for a singular asset has very little impact on the portfolio itself.
For example, RoninAi’s platform allows users to customize which cryptocurrencies the Ai works with for their portfolio, but RoninAi limits the total number of cryptocurrencies to be traded between 2 and 4. In cryptocurrency trading, it is crucially important to stick to core assets with high liquidity, in this market those are Bitcoin and Ethereum. They are the assets that are most guaranteed to be stable and succeed in both the short term and the long term. Diversification of cryptocurrencies should be based around these two, as they offer the most guaranteed growth.
#3. You Don’t Have Clear Entry/Exit Points
Disciplined trading is successful trading in any market. HODL-ing is simply not how you make the most profits in the short term or the long term. When cryptocurrency trading, taking some or all of your funds out of the market for a period of time is not only an acceptable practice (contrary to what many HODL-ers say), it comes highly recommended from experts.
Similarly, it is setting clear entry and exit points that may prevent you from making the absolute most profits possible, but will ensure that your profits are meaningful and consistent over time. For many traders, this means setting an exit point (say if an asset rises 10%) and an entry point (say if an asset being watched drops 10% from its current price). Sticking to these guidelines helps to eliminate the emotional side of trading, which experts regularly say is what is holding smart people back from truly profiting in every market, and especially the cryptocurrency market.
#2. You Don’t Use External Tools
Traversing the big and intimidating world of cryptocurrency on one’s own is a fool’s errand. There are a plethora of useful and valuable tools available, and the ones coming through the pipeline are even more promising. There are a wide variety of tools out there, from exchange trackers, to simple algorithmic bots, to complex artificial intelligence platforms.
Most tools that you encounter will allow your cryptocurrency trading profits to be increased noticeably, but only some of them really have the ability to change how you trade and maximize your profits, and are truly worth the investment required.
One major issue with the current suite of cryptocurrency trading tools is that many of them tend to have a very short shelf life, as they are technologically outmatched by newer tools. One reason why RoninAi is so special is the fact that it has cutting edge artificial intelligence technology built in for the present, and the complex machine learning abilities that ensure that it remains a leader in the field for a long time.
#1. You Don’t Rebalance Your Portfolio
Experts agree that the main weakness they see in cryptocurrency traders is that they seriously overlook the value of portfolio rebalancing. As mentioned in point #4 above, diversification is crucial to cryptocurrency trading and investment success. It allows you to capitalize on the spikes that take place across several different assets. However, all that profit and positive work done by diversifying your portfolio is nearly entirely negated if you do not rebalance your portfolio.
As one asset spikes, the value of the entire portfolio rises. However, if rebalancing does not take place when the spike is nearing completion, a lot of this gained value is lost when the inevitable self-corrective period occurs. With rebalancing, however, you can capitalize on the growth that that asset experiences, and avoid the downswing that is likely to follow, keeping the value of the portfolio where it was at its highest. Without doing this, you are effectively engaging in glorified HODL-ing.
The world of cryptocurrency is one that promises fantastic profits if the minute changes of the market can be capitalized on. However, many traders, especially the inexperienced ones, make these 4 critical mistakes that keep them from making the most profits.