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What To Avoid When Trading Cryptocurrency

The cryptocurrency world can be volatile, dramatic, and unpredictable. Read our guide so you know what risks to avoid when trading crypto.

SageFX - Oct, 15, 21

*Sage FX would like to state that traders should research extensively before following any information given hereby. Any assumptions made in this article are provided solely for entertainment purposes and not for traders to guide or alter their positions. Please read our Terms & Conditions and Risk Disclosure for more information.

Principal Points

  • Trading Cryptocurrency In 2021
  • What To Avoid When Trading Cryptocurrency
  • What To Avoid When Trading Anything
  • Trading Cryptocurrency With Sage FX

Trading Cryptocurrency In 2021

Cryptocurrency is one of the newest, wackiest, and most volatile sectors to hit mainstream trading. With the market capitalization clearing $2T, Bitcoin temporarily surpassing $64,000, and over 11,000 cryptos now listed on CoinMarket Cap, 2021 has certainly been a hot year for virtual currencies.

Of course, traders are eager to get in on new crypto trends early and emulate the first Bitcoin hodlers of the 2010s. But whether you’re a bitcoin purist or an altcoin adventurer, it’s important not to fall into the traps of crypto-mania in your search for success.

Check out our list of potential crypto pitfalls and trading dangers to safeguard your strategy.

What To Avoid When Trading Cryptocurrency

  1. FOMO – Fear of missing out. In a nutshell, this is the catchphrase of the crypto industry. The power of memes and internet influencers has been unleashed on the markets as never before and it’s easy to get swept up in the hype surrounding new cryptos. But don’t follow the crowds! Do your research as you would with any other tradeable assets, understand the fundamentals of the market, and ensure you invest for sound reasons.
  2. Impatience – We’ve all heard the stories of Bitcoin investors-turned-millionaires! In reality, however, these payoffs don’t tend to materialize overnight. It’s true that crypto volatility offers great opportunity, but it also carries intense risk. As a result, success is best pursued through safe, incremental gains.
  3. FUD – Fear, uncertainty, and doubt. Whilst it’s important to stay up to date with market developments, allowing yourself to be emotionally swayed by industry hype risks undermining your trading strategy. Keep your eye on the bigger picture to avoid being misled and always analyse the market fundamentals for yourself. Overall, focus on the trend of your profit/loss ratio, rather than what’s trending on Twitter.
  4. Neglecting the charts – The industry may be new relative to other markets, but that doesn’t mean you should disregard technical analysis in crypto. The essentials of pattern-spotting, resistance, and support are still relevant and useful for verifying your decisions. 
  5. Illiquidity – The choice of crypto assets may seem overwhelming, but not every virtual currency has a profitable future. Liquidity should be at the forefront of your mind when purchasing cryptocurrency in case you decide to exit the market at a later stage. This is because, without liquidity, volatility (and your potential loss) is likely to grow.

What To Avoid When Trading Anything

  1. Excessive risk – As a general rule, you shouldn’t stake more than 1-2% of your funds per trade. Most importantly, you should never invest more than you can honestly afford to lose. And you wouldn’t drive a car without a seatbelt, so why place orders without Stop Loss and Take Profit orders?
  2. Not planning – Whether it’s crypto, forex, indices, or commodities, trading without a plan is asking for trouble. Spend time familiarizing yourself with your assets with a demo, and only enter live markets when your strategy is up to scratch.
  3. Repeating mistakes – This is the definition of insanity! Keep a journal to monitor your progress and use your experience to improve your strategy.
  4. Not diversifying – Diversity is key for securing your investments in any industry but it’s especially useful for dealing with the volatility of cryptocurrencies. With a huge range of projects entering the market, you can easily spread your risk by splitting your investments across altcoins, stablecoins, and utility tokens.
  5. Trading on an unreliable platform – Security should be the priority in any trading activity you undertake, but you also want proper access to the most promising crypto opportunities. Fortunately, Sage FX doesn’t compromise on either of these counts!

Trading Cryptocurrency with Sage FX

Sage FX utilizes superior trading technology for multi-asset trading and makes it effortless for you to diversify your portfolio. Our current list of crypto pairs includes 19 exciting assets including Bitcoin, Ethereum, Ripple, and Doge. We’re always looking for the next breakthrough coins to enhance your trading potential.

If crypto is new territory for you, Sage FX offers a comprehensive demo account for you to find your feet. You can also stay up to date with the latest crypto developments on our news page.

Trade like a sage and make your crypto trading cool and confident! Sign up or log in to start trading now.