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12 Common Crypto Trading Errors and How to Avoid Them

As of 2022, 1 in 5 Americans has traded, invested in, or used cryptocurrencies. However, of the many people that trade cryptocurrency, not all of them are making money or taking a sensible approach.

While there’s a lot to learn to become a successful cryptocurrency investor, much of your success will rely on not what you do, but rather on what you don’t do. Avoiding certain things is essential if you want to make money and be happy with the investments that you make.

In this helpful guide, we’ll tell you about some of the most common crypto trader errors that you need to do your best to avoid.

1. Failing to Choose a Strategy to Use

One of the biggest reasons that people fail with crypto trading is that they don’t take the time to really think about their strategy before getting started. It’s important to choose a crypto trading strategy before getting started, instead of trying to make choices on the fly.

Without a strategy in place, it can be easy to make irrational decisions and let your emotions get involved with the trading process. It’s important that you take time to learn about the various strategies for crypto trading and ensure that you choose one that you’re comfortable with.

Once you’ve chosen a strategy, you should then stick to it and make sure that you understand how it works. You need to be sure to stick to the strategy as time goes on instead of switching strategies at a moment’s notice.

Keeping your goals in mind is essential when choosing a strategy and getting started with crypto trading. Without a solid framework in place, you’ll be trading aimlessly and this can lead to major mistakes as well as emotional decision-making. Start thinking about your strategy early on so that you can avoid this.

2. Not Spending Some Time on Paper Trading First

Another major mistake that crypto traders make is that they start trading with real money too early.

Because so many cryptocurrency traders are eager to get started, they’ll jump right in and won’t do some practice trading first. If you jump in head-first and don’t know what you’re doing, you could potentially lose a lot of money.

Instead, it’s better to start with paper trading. With paper trading, you’ll make use of online crypto trading platforms that allow you to test your strategies without spending any real money.

Spending a few months testing your strategy before adding your real money to the equation can be very helpful. It will allow you to see if your strategy works and will help ensure that you know how to implement it while staying level-headed.

By taking the time to test strategies first before diving in, you’ll do better in the long run.

3. Not Keeping Emotions Under Control

Some of the biggest losses that beginner crypto traders face are due to a lack of self-control and emotional calmness. In order to trade effectively, it’s important to keep your emotions in check and not make any rash decisions that aren’t aligned with your goals.

When you suffer from a setback, you may be tempted to do irrational things to make up for it such as selling your cryptocurrency too soon or making other decisions that you wouldn’t normally make. It can be easy to get impatient and to try to make money fast, especially if you’re feeling emotional and just suffered a big loss.

You need to be a person who is focused on the long term and who can control your emotions at all times. Be sure that you’re prepared to stay rational and logical when making crypto trading decisions and don’t do anything that doesn’t align with your overall strategy.

4. Becoming Overly Confident or Ambitious

One of the crypto trading errors to avoid is having too much confidence or ambition. Don’t think that you know it all early on or try to do too much too fast. 

Getting overly confident is a recipe for disaster and could lead to you making some poor decisions. It’s important that you don’t become overly confident even if you have had some wins previously. By being overly confident, you may make mistakes and rely more on luck than on your strategy or the knowledge that you have.

Additionally, don’t expect to make large amounts of profit at first. Trying to make huge crypto trading profits can be unrealistic and can lead you to make rash decisions that you’ll regret later on.

It’s better to take a more measured approach and follow a clear strategy instead of making decisions based on luck or becoming overly ambitious by trying to do too much early on. 

5. Not Using Stop Loss as Part of Your Strategy

When trading crypto, it’s important to know what stop loss is and to make sure you utilize it as part of your strategy. As the name would suggest, stop-loss orders allow you to protect yourself from heavy losses and not lose an excessive amount of money if something goes wrong with an investment.

It’s best not to be overly confident and expect that you won’t ever experience losses. Chances are that you may experience a loss at some point, so you’ll want to have a stop loss in place. A stop loss can help you to be more rational and can prevent you from losing too much money at once. 

However, remember that you’ll want to think carefully about what your settings are for the stop-loss. Avoid making your parameters too tight as you could end up losing money on a loss that could have bounced back.

6. Failing to Pay Attention to Security

For anyone who owns cryptocurrency, it’s important to pay close attention to security. You’ll want to be sure to keep your cryptocurrency investments as safe as possible at all times.

Many online crypto trading platforms are great for trading but don’t offer the highest level of protection. You need to take measures to secure the crypto you own and store it in a way that nobody can get access to it or hack into it. If you don’t take security seriously, create strong passwords, and take other measures, then you could end up losing your cryptocurrency through theft or cybersecurity threats.

When holding onto cryptocurrency, you need to make sure that you’re storing it in a secure cryptocurrency wallet.

At the very least, you’ll want to use a “hot” software wallet that remains connected to the internet. However, for better protection, you might want to consider using a “cold” physical hardware wallet instead.

Storing your crypto in a hardware wallet will allow you to keep your crypto safe until you’re ready to trade it. However, make sure that you store it securely and don’t let anybody get access to it.

7. Not Knowing Your Options for Getting Cash

Many cryptocurrency investors don’t realize that there’s more than one way to turn crypto into cash. 

One of the most popular methods is to transfer money from a cryptocurrency platform to a bank account. This works similarly to exchanging money at an airport or in a foreign country and you’ll get a certain rate when doing so. 

Keep in mind, however, that there are other ways to cash out your Bitcoin as well. In addition to transferring money to your bank, you can also choose to use a third party to exchange your Bitcoin for cash.

A great way to do this is by visiting a Bitcoin ATM and following the instructions to sell your Bitcoin and get cash instantly. Be sure to click to learn more about Bitcoin ATM fees and how to use a Bitcoin ATM.

8. Joining and Following Pump-and-Dump Groups

Once you enter the crypto trading world, you’ll find that there are things known as pump-and-dump groups that you can join and follow.

In these groups, traders will work together to make the same moves on a trading call with an aim to affect cryptocurrencies. This coordinated effort promises to artificially increase the buying volume of a cryptocurrency until those same traders finally sell the cryptocurrency and make a significant profit. 

However, while these groups make big promises, there is little chance that they will actually work for you. These schemes are unreliable and unlikely to lead to you actually making any money.

Especially as a beginner, trying to take advantage of any of these pump-and-dump calls is usually a big mistake and a waste of your time and effort.

9. Using Margin Trading as a Beginner Crypto Trader

When trading cryptocurrency, margin trading is something that you may also be tempted to make use of. Margin trading is offered by many different crypto platforms and brokers. With margin trading, the platform or broker will allow you to borrow money to trade on the crypto market.

Many beginners are tempted to use margin trading in order to make bigger profits, but in many cases, it’s a major mistake. Using margin trading may allow you to make more money if you’re lucky and have your strategy down pat, but it can also lead to big losses as well.

It’s best not to invest in cryptocurrency with money that you don’t actually have. You should plan to avoid margin trading until you have a better handle on your strategy and some more experience under your belt.

10. Trading Cryptocurrency Frequently

When trading cryptocurrency, you’ll also want to avoid overtrading. 

Especially if you’re a beginner trader, you might be tempted to trade very often. However, even as a day trader, you don’t need to trade as regularly as you might believe. 

Don’t trade make trades just for the sake of it, but instead make sure that you have a clear intention and strategy when doing so. Make sure that you evaluate each trade that you make and ensure that it will be a good choice based on logical and sound decision-making.

Trying to set a fixed number of trades to follow each week is a recipe for some losses. You may only want to make a few trades a week or you may choose to make more trades depending on the specific opportunities that you have and depending on what the market is doing. Avoid trading too often just because you think that you need to.

11. Failing to Diversify a Crypto Portfolio

Like with other types of investments, it’s also important to diversify when trading cryptocurrencies. You’ll want to make sure that you have a diverse portfolio and that you’re not putting all of your eggs in one basket. 

Remember that although Bitcoin is the most popular cryptocurrency, there are others on the crypto market as well. You shouldn’t only invest in Bitcoin if you’re interested in being a great cryptocurrency trader. Many other crypto assets can provide unique opportunities to make a profit and you can capitalize on the differences between them all.

However, make sure that you start slow when delving into various cryptocurrencies. Be sure that you take time to learn about each one that you’re thinking about trading and don’t rush into investing in many of them all at once.

12. Always Following the Crowd

When it comes to investing in either cryptocurrency or stocks, it can be easy to get caught up in hearsay and feel that you need to capitalize on an opportunity because everybody else seems to be talking about it.

Avoid believing everything you hear or read and make sure to come to your own conclusions about potential investments. Don’t follow the hype surrounding various cryptocurrencies religiously and avoid following a herd mentality.

While there are many cases where the things that you hear can be helpful and can allow you to make great trading decisions, they can also lead you astray at times as well. Make sure to always do your own research after hearing about investment opportunities. Make your decisions while also remembering your overall cryptocurrency trading strategy as well.

Avoiding the Most Common Crypto Trader Errors

If you want to become a successful cryptocurrency investor, be sure to take steps to avoid the common crypto trader errors listed above. While there’s a lot to learn to become a great investor in cryptocurrencies, it’s just as important to avoid certain things if you want to make solid investments.

Need more financial tips and investment strategies? Start reading through our blog now to find more useful investment articles and guides.


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