Over 84% of new retail cryptocurrency traders experience financial loss within their initial year, according to research findings.
In the dynamic world of cryptocurrency trading, newcomers often face a steep learning curve. A recent survey of 1,005 retail crypto traders revealed some startling statistics about the challenges that beginners encounter in their first year.
First-year traders are prone to making common mistakes that can lead to substantial losses. According to the survey, 84% of new traders lose money and fail within their first year. The most frequent errors include poor research (55%), FOMO (44%), and emotional trading driven by fear or greed (39%).
Emotional Trading
Making impulsive decisions based on emotions rather than a clear investment plan is a common pitfall for new traders. To avoid this mistake, it's essential to develop and stick to a strategy, regardless of market fluctuations.
Overtrading and Chasing Losses
Excessive trading and reckless attempts to recover losses are other common errors. To prevent overtrading, traders should set daily trading limits, avoid unnecessary trades, and walk away when limits are reached.
Poor Risk Management
Ignoring stop-loss orders and risking too much per trade are signs of poor risk management. To mitigate this risk, traders should use stop-loss orders and limit the amount they risk on a single trade to no more than 2% of their portfolio.
Lack of Research
Trading without a thorough understanding of project fundamentals and technicals is a recipe for disaster. To remedy this, traders should study project tokenomics, development updates, and perform technical analysis before making trades.
Chasing "Moonshots" (FOMO)
Buying coins only after rapid price increases due to fear of missing out (FOMO) is another common mistake. To avoid this, traders should use entry strategies based on technical analysis and be patient, avoiding buying during price explosions.
Overconcentration on One Asset
Betting everything on one coin is a dangerous strategy. To reduce volatility risk, traders should diversify across sectors and different kinds of crypto assets.
Poor Wallet and Tax Management
Confusion over wallet types and neglecting tax compliance can lead to penalties. To avoid these issues, traders should learn about wallet functions, keep secure records, and address tax obligations.
Additional Advice
Regular self-education, monitoring automated tools if used, and controlling psychological biases like overconfidence are other essential tips for new traders.
The survey results should not be interpreted as financial or investment advice. The findings reveal practical insights to help beginners avoid mistakes and improve their chances of long-term success in the crypto market. Most new traders lose money not because the market is impossible to beat, but due to lack of preparation, common traps, and poor trading habits.
In conclusion, treating trading as a skill that takes time, patience, and discipline to master is crucial for long-term success in the crypto market. Seeking professional advice when faced with losses and avoiding common mistakes can help new traders navigate the challenges and potentially reap the rewards of successful trading.
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