After years of helping everyday Australians find their feet in the world of crypto, we’ve seen new traders make the same mistakes over and over again. And it hurts to watch.
While you can make the most of cryptocurrency without being an expert, crypto is definitely not something you master overnight.
The easiest way for new traders to minimise their losses and maximise their profits is to learn from the mistakes of others and get the lay-of-the-land before 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 the 12 most common beginner crypto mistakes to avoid if you’re new to the game and want to bypass some time consuming and expensive mistakes.
12 Most common beginner crypto mistakes to avoid
1. Not choosing the right crypto exchange platform
Before you begin trading, you need to choose a cryptocurrency exchange to sign up with. Unfortunately, this first step is one that many beginners rush into, and it can be very costly down-the-track.
Here are some of the important things to consider when choosing the right exchange for your individual needs:
- Simplicity and user-friendliness of the platform
- A wide selection of cryptocurrencies
- Low fees and good asset prices
- The ability to buy crypto directly with AUD
- Platform authenticity and security
- Educational content
- Reliable and personalised customer support
- Regularly updated security & cold, offline storage
- Useful trading features
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.
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 don’t hesitate to ask us any questions you might have – we’re always happy to help!
2. Not knowing what a good investment looks like
When it comes to investing in crypto, you won’t get far without knowing what a good cryptocurrency investment looks like.
A cryptocurrency worth investing in will generally have:
- A unique function or utility that it brings to the ecosystem
- A diverse community behind it ready to adopt its use-case
- A reputable team of developers
- A well-written whitepaper
- A road map for future development
In such a competitive marketplace, for a crypto to succeed above all the others, it must possess a unique function or significantly improve on an existing technology. A crypto’s ability to solve a problem in the world is what defines whether or not it will succeed in the long-term.
Additionally, when evaluating a cryptocurrency, there are other factors to consider beyond just the price of the coin (and remember: cheaper does not always mean better!). Some of these include:
- Market cap
- Trade volume (how much the coin is being traded)
- A coin’s past track record
- Corporate partners and project backing
By making sure a project is well-supported by trustworthy and reputable names, you’ll save yourself some expensive errors going in on coins that talk a big game but never actually make it off the ground.
Check out our article on how to evaluate a good crypto investment to learn more!
3. Believing everything you read
Not all advice is created equal, especially in the world of crypto. A common mistake beginners make is following tips and advice they see on social media from people they don’t know or have never heard of.
The Internet is rife with crypto trading advice, a lot of which is just false hype and, in some cases, blatant .
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 have some expertise and a decent following or reputation to back it up.
If you’re a crypto trader and want some free, personalised guidance from trained professionals, consider speaking to one of our gurus at Digital Surge. We’d be more than happy to help you figure out an investment strategy that works for you!
You can also check out our guide on how to do your own research in crypto the right way.
4. Not diversifying your portfolio
If you’re looking to reduce risk and maximise profit, then spreading your investments across different cryptos (and other types of investments) is a good idea.
This is much more effective than investing in just one coin as it is less likely that all cryptocurrencies will simultaneously crash. You can develop a strategy that is tailored to your trading style, risk tolerance and goals.
Generally, 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:
40% Bitcoin (BTC)
20% Ether (ETH)
30% leading altcoins such as Dash (DASH), Litecoin (LTC), and Monero (XMR) 10% small-cap coins such as TVK and FMG.
For more examples of well-diversified portfolios, click.
It is important 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. Don’t invest in more coins that you can keep track of!
If you’re completely new to the game we suggest starting with small-medium amounts of Bitcoin and Ethereum, and then adding in some other less established altcoins that you’ve researched and feel good about.
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5. Trading based on 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.
- FOMO is the fear of losing out on a limited-time-only opportunity and all the profits that come with it.
- FOMO manifests 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 which include limits of allowable losses and profits for each coin you invest in.
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 is a marathon, not a race. There will always be other opportunities.
6. Not doing your own research
Do your own research. DYOR. You’ll hear that a lot in the world of crypto. And for good reason. It can be hard to discern the truth-tellers from the hype-salesman in this industry so doing your own research is crucial.
Whenever you get information from a source, make sure that they are reputable and trustworthy. Evaluating the size of their following is a good rule of thumb for determining whether or not you should take someone seriously. A you continue on your crypto journey it will become clearer which sources are reliable and which aren’t. At the end of the day, you have to ask yourself:
What does this cryptocurrency bring to the market? Who are its competitors? Does it have something that its competitors don’t? Who is the team behind it? And is this a short or long-term hold?
Youtube, twitter, news articles, Reddit and other trustworthy websites are a good place to start for crypto information. Crypto news and updates can be extremely time sensitive so make sure you’re aware of when it came out when you’re doing your research.
The more you read, listen and watch, the more holistic your knowledge will be of the crypto market. Doing your own research will serve you as an investor more than anything else you can do. Be sure to check out our guide on how to do your own research in crypto.
7. 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 a piece the next Bitcoin. Then it crashes, taking 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 buying and selling swings and dips then we highly recommend having a well-defined exit set up.
Selling your assets and taking profits in increments (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.
Check out our guide on which crypto investing style is right for you.
8. Constantly searching for the next Bitcoin or Ethereum
Much of the crypto-craze from the last decade has come from coins like Bitcoin and Ethereum turning regular people into millionaires overnight. While this can (and does) still happen, searching for the next Bitcoin or 1000X coin 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 project 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 1000X 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.
9. Panic buying/selling
In the world of cryptocurrency, price swings are the norm, not 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 while remaining committed to your limits and investment goals will serve you greatly in the long-term.
Many of the more established cryptocurrencies bounce back after a price drop (Bitcoin is a great example), so it is important not to let your emotions get the better of you, especially if you believe in the technology of the project (which you should if you’ve invested in it)!
Panic buying is the other trap to look out for. Newbies tend to believe more than they should. Many are way too eager to jump on ‘the next big thing’. This can result in them hastily rushing into a trade that they have not properly researched or evaluated.
Finding the next undiscovered 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 every coin before you invest. Let go of your FOMO and embrace the slow and steady approach!
10. Thinking only in terms of price
Naturally, new 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 equally important factors to consider include:
- The technology behind a project
- The developers and team 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
- The market cap and circulating supply
- The partners and the backing a project has
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.
Getting in at a good price is important but things change quickly in the world of crypto. New developments, changes to regulation and announcements mean drastic price swings should always be accounted for!
It’s also worth mentioning that just because a coin is sitting at a ridiculously low price (0.20c for example), it does not automatically 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. Cheaper is not always better!
11. 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.
Make sure you choose an exchange with:
- 2-factor verification (2FA) – a great first step to avoiding any password hacking!
- A storage system that puts the majority of assets in cold, offline storage
- Sophisticated multi-layered security that is regularly updated to deal with the latest threats and hacks
- Full transparency of their location and the people who run the company
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 be aware of the various types of crypto phishing scams out there. You can learn how to stay safe with crypto with this simple guide.
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.
12. Putting in too much money too soon
Trading, like most things in life, comes with 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. Test the waters with a few trades before capitalising on a big trade opportunity that 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 with our live chat to organise a free phone consultation, we’d be more than happy to help!
Good luck!
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 trading platform which provides Australians with a safe and simple way to make the most out of crypto. We also have plenty of other crypto articles for beginners looking to get the practical knowledge they need to make smart, profitable trades from the get-go.
See you around!
