23 Beginner Crypto Mistakes to Avoid

Nico Lim
January 25, 2021

A day may well come where we are all “that Bitcoin guy.”

As one of the fastest-growing financial markets in the world, cryptocurrency has more people flocking to it than ever before. However, after years of helping Australian crypto traders start their investing journey off on the right foot, we’ve seen people make the same mistakes over and over again.

While you can make the most of cryptocurrency without being an expert, crypto is not something you master overnight.

The easiest way for beginners to minimize their losses and maximise their profits is to learn from the mistakes of others and get the lay-of-the-land before really diving into investing.

At Digital Surge, we want all our traders to make the most profitable trades from Day 1, so we’ve compiled a list of some of the most common beginner crypto mistakes to avoid if you’re new to trading and want to stay ahead of the curve. Enjoy!

Most common beginner crypto mistakes to avoid:


Not knowing what a good investment looks like

When it comes to making the right crypto investments, it helps to know what a good cryptocurrency looks like.

A cryptocurrency worth investing in will generally have a diverse community behind it, a well-known team of developers, and a well-written whitepaper. In such a competitive marketplace, for a crypto to succeed above all the others, it must possess a unique function or significantly improve an existing technology in the market. A crypto’s unique ability to solve a problem in the world is what defines whether or not it will succeed in the long-term.

When evaluating a cryptocurrency, other factors to consider beyond just the price of the coin (e.g. market cap, trade volume (how much the coin is being traded) and a coin’s past track record).

By making sure all these things look sound and are well-supported by trustworthy and reputable people, you’ll save yourself some expensive errors going in on coins that talk a big game but never actually make it off the ground.

Not having a clear investment plan or strategy


“Failing to plan is planning to fail,” so the saying goes. Not having a clear investment plan is a mistake that many beginners make.

By not having a clearly defined set of trading rules and goals, you open yourself up to a world of risk and emotionally-driven decisions (both when things are going really good or really bad).

While you do not need to be extremely rigid or have everything planned out to the last detail, having a clear set of guidelines, allowable limits of losses, profits, and some overarching trading strategies and mantras can help you achieve long-term profitability in trading while making the process a lot less stressful.

How much do you want to invest per month/year? How much can you afford to lose? Are you more focused on short-term trading or long-term holding? Would you rather go in with a lump sum or invest a little bit each month? How aggressive do you want your trading style to be? How comfortable are you with high-risk trades? When will you get out of a trade to either take the profits or cut your losses?

If you buy a coin and you decide that you will sell it when it triples in value, you should sell it when it hits your price target and not wait around to see what happens next. If you’ve reached your target, be happy and take the profit!

Believing everything you read

Not all advice is created equal! Another common mistake beginners make is following tips and advice they see on social media or on Bitcoin forums from people they don’t even know.

The Internet is rife with crypto trading “advice”, much of which is just false hype and, in some cases, blatant pump and dump schemes. Major news sites also commonly release very negative and threatening news, however, keep in mind that a lot of these news articles and exaggerated headlines are intended for the sole purpose of generating clicks, controversies, and FUD (fear, uncertainty and doubt).

If you are going to take someone’s advice, make sure that they are real-world experts and have reputations to back it up. If you’re a crypto trader and want some free, personalised guidance from trained professionals, considering speaking to one of our trading gurus. We’d be more than happy to help you put together an investment strategy that works for you!

Not diversifying your portfolio


A good strategy for all traders looking to reduce risk and maximise profit is to spread your investments across different cryptos (and other types of investments).

This is much more effective than investing in just one coin as it is highly unlikely that all cryptocurrencies will simultaneously crash and you can develop a strategy that is tailored to your trading style, risk tolerance and goals.

Having a blend of the largest, most stable cryptos along with some medium-sized to small cryptos (by market cap) is recommended.

An 80/20 blend of large-cap to mid to small-cap is a good rule to follow if you are new to crypto investing. This will also minimise any liquidity issues of your portfolio. Following this rule will allow you to make sizable profits from any sudden surge in the small to mid-cap cryptos, whilst also having a large part of your investments in stabler coins.

An example of a diversified crypto asset portfolio that was given in a forum is: 40% Bitcoin (BTC), 20% Ether (ETH), 30% leading altcoins such as Dash (DASH), Litecoin (LTC), and Monero (XMR), and 10% small-cap coins such as TaaS (TAAS) and Iconomi (ICN).

We do want to note, however, that while diversification is definitely a good thing, we do not advise spreading yourself too thin over different assets. A common rookie error is to allocate small amounts to a variety of small-cap altcoins instead of focusing on a handful of larger, more stable and established coins.

If you’re completely new to the game we suggest starting with small-medium amounts of Bitcoin, Ethereum, Ripple or Litecoin and then adding in some other lesser-known altcoins that you feel good about.

Not knowing when to exit and take profits


So, you bought a promising coin at a good price and it has begun its ascent. It’s rising and rising and rising and… now what?

Even though every new trader dreams of this situation, many don’t have any idea what to do when it actually happens. Often they end up holding an asset too long in the hope that they have some of the next Bitcoin, only to see it crash the next day and take all of their profits along with it.

By not knowing what your goals and limits are with a trade, you open yourself up to a lot of unnecessary risk. Before purchasing a coin, we recommend having relatively clear goals and limits of how much you would like to make and at what point you will cut your losses and get out.

A big part of being a successful crypto trader is learning to regulate your emotions and stay composed when the pressure and stakes are high.

If you’re more of a HODLer/long-term investor, having an exit strategy is not as vital.

However, if you’re trading the market then we highly recommend having a well-defined exit set up. Selling your assets in stages (rather than all at once) is a great way to ensure you get immediate profits which can then be reinvested when the market is favourable.

Don’t succumb to FOMO


Now this is one we really have to stress. FOMO, or Fear Of Missing Out, is one of the main culprits behind beginners losing money early on in their investment career.

At its core, FOMO is the fear of losing out on a limited-time-only opportunity and all the profits that come with it. This can manifest as selling too early, buying when prices are high as you feel like you are missing out on an astronomical rise, or even just investing in a dubious project that is surrounded by hype and big promises.

While getting rid of FOMO entirely is difficult, you can actively combat it by developing a trading strategy and creating a set of rules around trading which include limits of allowable losses and profits.

Sticking to your game plan when the market is going crazy is a skill that will serve you well in the long-run. It is important to understand that new opportunities in the world of crypto appear every day, so relax and let go of your fear of missing out.

Investing in a marathon, not a race – and there will always be other opportunities.

Cheaper is not always better


While many beginner traders are searching for the next Bitcoin, Ethereum, or 2000% gain coin, finding it early is extremely unlikely. While buying a cheaper coin does provide the opportunity for quick and astronomical gains, a cheap coin is as risky as any other investment you could make.

Just because a coin is sitting at a ridiculously low price, this does not make it a good investment. While a coin at 5 cents could easily hit 20 cents in a short period of time, that same coin could easily drop a few cents, resulting in the loss of a major chunk of your investment.

Additionally, if a coin is extremely cheap, there is probably a reason why. Always do your research on the technology, community and news surrounding the coin and if you are going to invest in a very cheap coin, make sure you know what developments are ahead that might suggest a potential boost in its value.

Not choosing the right crypto exchange platform


This is one that many beginners rush into and it can be very costly down-the-track. Platform security is vital, low fees will save you some serious cash, and personalised customer-support can give you the guidance and help you need to be a successful and well-informed trader from the get-go.

Also, be sure to select a cryptocurrency exchange with a wide range of coins and a user-friendly interface – not all crypto platforms are simple to use and this can be a massive pain if you’re still learning the ropes.

Some larger crypto exchanges in Australia do not offer great customer support, limit which coins they support, and make things a little hard to understand with all the bells and whistles they offer.

At Digital Surge, we provide some of the best value of any exchange in Australia in terms of low fees, the number of coins offered, platform security, and personalised customer support.

If you’re interested in trading with us, check out our new and improved website and don’t hesitate to ask us any questions you might have – we’re here to help!

Sending your coins to the wrong wallet


This one is just terrible – and unfortunately, people lose a lot of money this way.

Sending the wrong currency to the wrong exchange address can be irreversible and can often mean losing your coins forever. To avoid this costly (and embarrassing) situation, make sure to double-check everything.

Are you certain you haven’t mixed up the deposit and withdrawal address? Are you sure this is the right currency you want to send? Did you accidentally select BCH instead of BTC? Are you 100 percent sure that you copy and pasted the entire line of the address and not just a part of it? Good. Now check them all again!

Not being a part of the crypto community


One of the best ways make the most of crypto is to join the crypto community. This is a great way to get good advice, make friends, meet like-minded people and stay informed on all the latest happenings in crypto.

By finding a good online or in-person community (there are some great ones in Australia!), you will undoubtedly have an advantage over other traders who only keep to themselves.

The world of crypto is fast-paced, and it can be pretty hard to keep up with the constant influx of new projects, exchange-related dramas, rumours, news, scandals and developments. Finding a group of people to talk things over with can be a great way to stay in the loop and have some fun along the way.

Thinking only in terms of price


Naturally, beginner traders get caught up on prices – after all, the world of trading seems to revolve around profit/loss, so why wouldn’t price be the most important thing?

Price is, of course, important, but it shouldn’t be the only thing you’re looking at when you're trading.

Other important factors to consider include the technology behind a project, the developers involved, how it will be implemented into the existing market, whether or not it will succeed in the long-term, if there is a real need for this coin and a number of fundamentals of a coin that can help you evaluate its true value.

Only after assessing these other variables can you truly understand what the price means in terms of whether or not it is a good investment.

Prices are important but things change quickly in the world of crypto. New developments, changes to regulation and announcements can mean drastic price swings and should always be accounted for!

Putting in too much money too soon


Trading, like most things in life, has a learning curve. Throughout your trading journey, there will inevitably be mistakes and losses and most of them are likely to happen at the start of your trading career.

With this in mind, if you are just starting out, we recommend not putting in more than you are comfortable losing and to test the waters with a few trades before capitalising on a big trade opportunity you think will reap significant profits.

If you’re new to the world of crypto, some trading advice from crypto experts can be invaluable, even if it's just a short conversation with an expert about your initial goals and investment strategy.

At Digital Surge, we offer all our customers free trading guidance with one of our seasoned crypto gurus, ensuring that all our traders get started off on the right foot and are making the best trades possible from Day 1.

Get in touch for a free phone consultation, we’re more than happy to help!

Panic selling/buying

In the world of crypto, price swings are the norm instead of the exception. Many newcomers tend to panic when they see prices drop, with many over monitoring their portfolios and then panic selling in order to cut their losses.

One thing to remember here is that you only lose a trade when you sell.

Sure, sometimes selling when things start to go bad can save you a lot of money, but learning to handle price fluctuations and stick to your limits and investment goals will serve you greatly in the long-term.

Most cryptocurrencies (Bitcoin included) bounce back after a price drop so it is important not to let your emotions get the better of you. Even the best trading strategy isn’t worth much if you don’t have the stomach to stick it out! Develop a set of trading rules and guidelines and stick to them.

Panic buying is the other trap to look out for. Newbies tend to believe more than they should and are way too eager to jump on “the next big thing”. This often results in them hastily rushing into a trade that they have not properly researched or evaluated.

Finding the next Bitcoin or Ethereum should not be your main trading strategy. If you’re looking to make real, long-term profits in crypto, you should be researching and evaluating any coin before you invest. Let go of your FOMO and embrace the slow and steady approach!

Overtrading & paying too much attention


Beginners often get super excited when they enter the world of crypto and often want to make 10 trades a day and capitalise on every market movement. This is a mistake.

Not only is overtrading ineffective but all exchanges have fees on trades and this can be very costly in the long-run. The reality is that there simply aren’t many good trading opportunities every day.

The more you trade the more you open yourself up to making bad moves that go against your investment strategy and set of trading rules and guidelines. And you should always be researching before making any decisions.

There is also such a thing as paying too much attention! When you start out, it can be tempting to constantly be checking how your positions are doing and how they market is changing – after all, it is pretty exciting to see one of your assets on the rise and closing every trade manually instead of sticking to your loss/profit limits might seem like a good idea at first.

However, as traders who have been in the game a while, we urge you not to pay TOO much attention to the market. Most positions take time to develop and the more you monitor your portfolio, the more you will be tempted to modify and tinker with it when there is absolutely no need to do so.

Do your research and trust your strategies and set trading goals to do the work for you. It’ll save you a bunch of stress and will probably do wonders for your long-term profit margin!

Failing to keep a trading journal


The world of crypto is not something you master in a few weeks. Once you have accepted that there will inevitably be losses in your trading journey, you can learn that there is actually no such thing as a complete loss.

Every loss or mistake has an important lesson to teach and by keeping a trading journal you can ensure that you learn from your mistakes and do not repeat any of your past blunders or lapses in judgement.

Record the details of a trade and make a note of your emotional state, thought process, the research you did, and ultimately how the trade progressed and turned out. Many beginner traders fail to keep a trading journal (especially when it comes to recording emotional/thought processes) and they are missing out on an invaluable learning opportunity.

With crypto trading being so volatile, it has become apparent that knowing yourself is just as important as knowing the market. Identify your emotional triggers and tendencies and make an effort to record the variables and factors involved in every successful/non-successful trade.

If you are serious about long-term profits, a trading journal that you can refer back to will help you immensely.

Falling prey to the sunk cost fallacy


The sunk cost fallacy is remaining involved or committed to something purely because of the time, energy and resources you have already invested in it.

Whether it is a relationship, a university course you hate, or a bad crypto investment, this is a sure-fire way to turn a bad decision into a really really bad decision. Unfortunately, human psychology compels us to want to stay committed to something we have already invested our time and energy into.

In the world of crypto, this commonly manifests as staying attached to a coin that has shown every indicator of being a bad investment. Some traders become more and more entrenched in their positions even after the market has crashed, with many doubling down on a losing investment in the desperate hope that they were “right all along”.

While there are plenty of instances where sticking out market fluctuations is a solid strategy (especially for long-term investors), it is important to be aware of how easy it is to commit the sunk cost fallacy. When it comes to trading, rationality trumps emotion every time!

Trying to find the next Bitcoin or Ethereum


Much of the crypto-craze we have seen over the last decade has come from coins like Bitcoin and Ethereum turning regular people into millionaires overnight. While this did (and does) happen, searching for the next Bitcoin is not the best way to enter the world of crypto trading.

Crypto is one of the most lucrative markets out there, but beginner traders should be aware that the vast majority of crypto coins fail before ever really taking off.

These days, there are thousands of altcoins to choose from and everyone seems to be confident that their coin is the one that will be the next big thing. Needless to say, this is simply not the case.

Sure, lucky breaks happen and people do get rich overnight, however, if you are looking to minimise your risk and create a long-term trading strategy that gets results, we recommend dropping the idea of going all-in on the next 2000% gain coin.

A well-balanced portfolio that is thoroughly researched is your best bet and we urge all beginner traders not to fall into the trap of believing the hype and praying you will be the one who gets lucky on the next big cryptocurrency.

Forgetting about cybersecurity


While the world of crypto has gotten a lot safer over the past decade, trading crypto still involves some level of security risk. Choosing a crypto exchange with regularly updated, multi-layered security, offline asset storage and two-factor authentication is highly recommended and will save you a lot of hassle in the long-run.

It is also important to be aware of potential scams and frauds. Some of the most common ones include unsafe exchanges, “pump & dump” schemes, fake coins, email scams and password hacking.

Don’t click on links or attachments from unknown email senders and try and be aware of the various types of crypto phishing scams out there. Additionally, it is wise not to be too vocal about your assets when discussing crypto investments in online forums and on social media.

If you’re looking for an online platform with regularly updated security measures, Digital Surge has you covered. With multi-layered security, offline asset storage and two-factor authentication, our online platform is backed by the latest and most trusted security systems out there.

Not staying informed


Things move fast in the world of crypto. News, developments and changes to laws and regulations are always occurring and have a huge impact on the market.

While you should always do solid research on the fundamentals of a coin, it is also important to follow the news about the coins you have invested in and the cryptocurrency markets in general.

This could include public announcements, changes in regulations, large-scale exchange hacks, new emerging coins and technology, and even tweets from reputable names and industry leaders.

While there is far too much news to keep up with it all, having a few news sites and YouTubers you check into and knowing what news relates to your portfolio and investment strategy is key to being a successful trader.

By staying up-to-date with crypto news, you will not only greatly increase your chances and overall understanding of the market, but you will slowly learn the reasons behind why your portfolio may be up or down on any given day.

Don’t invest like a trader and trade like an investor!


While the terms trading and investing are often used interchangeably, there is a distinction that all beginner traders should understand.

If you are looking to invest, it usually refers to a longer-term strategy and you should not expect to see quick returns on your investments. This is usually a low-risk strategy that involves choosing a few coins that you think will perform well over a number of years.

On the other hand, a trader speculates on the market and price movements over a short period of time. This is a more involved approach which requires a stronger stomach, risk tolerance and the ability to stay composed in high-pressure situations.

Given the inherent volatility of the crypto market, trading for short-term profits can be an extremely lucrative strategy and we have seen many traders make significant profits in a very short amount of time.

At Digital Surge, we recommend that all our customers have a well-diversified portfolio with a blend of small, mid and large-cap investments (with the majority of your portfolio being more stable, established coins). That way, you minimise your overall risk while still having the possibility of big gains in the short-term.

While your portfolio allocation depends entirely on the type of trader you want to be, don’t hesitate to get in touch if you need any help putting together a trading strategy – our team of friendly experts are more than happy to give you the guidance you need to start your trading journey off on the right foot!

Making rash decisions based on emotional, excitement and speculation


Hastily buying or selling a crypto based on unconfirmed news is something that many traders are guilty of doing at one point or another.

Many newbies are low-key waiting for the next big thing to roll around so they can jump on it and ride the rocket all the way to financial glory, however, this is an approach that is likely to lose you a lot of money before you even get the lay-of-the-land.

Beginner traders often make decisions that have not been properly thought-out and are based on FOMO or some new piece of information which they think is both real and truly ‘breaking news’.

Unfortunately, this is rarely the case and there are many pump-and-dump schemes out there who prey on the naivety and impulsive decisions of inexperienced traders who will buy and sell at the drop of a hat.

Crypto rewards those who can keep a level head and never let their emotions trump logic. For some timeless crypto trading wisdom that will help guide you on your journey, click here.

Always betting on uptrends


New traders often get caught up in price trends without taking into account the many other important variables in evaluating a good crypto investment.

Many times, people will hastily invest in a coin that appears to be on the rise without realising that the price may have reached its maximum value there is likely to be a correction on the way.

Knowing the technology, developers and history behind the coin, as well as its previous highs (very important!) will help you evaluate whether or not a rising coin is really a good investment.

Following hype over technological innovations


Many newcomers are tempted by cryptocurrencies that make a lot of big promises and use a lot of cool words, however, by now you should know that the world of crypto is full of hype and that you should be extra sceptical of any promises that seem too good to be true.

Often, beginners fall for hype and news announcements without ever really paying attention to the underlying technology behind the coin, which, at the end of the day, is far more important.

The success and potential of any given cryptocurrency are dependent on whether or not it has the unique ability to solve a problem in the market or improve on an existing technology.

Without some unique utility or function, a real-world use case and a solid team behind it, there is very little chance that a coin will grow and develop into what the hype promises.

One of the most fascinating aspects of crypto is the innovation and groundbreaking technology behind it. The sooner you get curious and passionate about understanding the technological side of crypto, the sooner you will have the information and confidence you need to make educated and profitable investments.

Conclusion


And that concludes our list of common crypto trading mistakes to avoid, we hope it’s been helpful!

If you are new to the world of crypto and are looking for a crypto platform with low fees, personalised customer support, and an easy-to-use interface, check out our new and improved platform which provides Australians with a safe and simple way to make the most out of crypto. We also have plenty of other great learning resources for beginners.

See you around!

Nico Lim

Nico is a writer with a keen interest in technology that can simplify and enhance our everyday lives. He has a knack for making things simple and easy to understand and is a regular contributor for Digital Surge.