Most common mistakes made by crypto traders

- 20 minute read

Money burning up
Paul Hopmans
Crypto Expert
Paul Hopmans

✔️ What beginner mistakes are commonly made?

✔️ How do you keep your coins safe?

✔️ Scams

✔️ Which coins to buy?

✔️ What should you do? A lot of mistakes are made in crypto trading. There are also a lot of different kinds. You could write a book about it. Since this is a website we will spare you the book version.

With each chapter, I will include a quote from the legendary Warren Buffett. This is for several reasons. For one, everyone knows Warren and I think he is an incredibly smart and interesting man. His results speak for themselves.

Moreover, it reminds me of another one of my favorites: Stephen King. He begins a chapter in almost every book with a quote. Let's do the same here. Just for fun.

Common mistakes

Table of Contents

  1. Beginner mistakes when trading crypto
  2. Storing crypto coins in obscure places
  3. Securing your account
  4. Getting scammed
  5. Buy new coins
  6. Poor portfolio management
  7. Letting profits evaporate
  8. Trading with leverage
  9. So what should you do when crypto trading?

Beginner mistakes when trading crypto

"Risk comes from not knowing what you're doing."
Warren Buffett
  1. Instantly betting real money. You don't know anything about the crypto market yet, but are pleasantly excited. You just talked to someone who told you a lot about it and now want to get in. Very understandable. It's an exciting world. You have 1,000 euros of savings lying around anyway. You invest and a week later it's still worth 900 euros. It could also have been 1100. That's what we call gambling. There are plenty of opportunities to dry practice (paper trading) trading crypto. Another possibility is to simply start small and bet only 10 of those 1000 euros. That one euro is slightly different from 100 on a stack of 1000.
  2. Not having done any research. If you haven't done any research, it is also impossible to determine a price or a strategy. Cryptocurrency and blockchain may seem simple, but there is a huge mountain of facts behind them that you need to analyze carefully before you even begin to understand what to look out for then. An example from my own past: I bought a coin because it was worth much less than its all-time high. That seemed smart, until I found out that coins could lose more than 90% of their value relative to their all-time high. Then I quickly sold at a big loss, because only then did I know I had to wait for the bottom of the market. You can do a lot of research on CoinGecko. Know the multi-year market cycle. Study the charts and determine a buy-in price. It is going too far to elaborate on this in this blog, as this is a very extensive topic. For that, I refer you to our blog starting with crypto .
  3. Not knowing enough about blockchain. So what, you might say so. But if you have to start sending crypto tokens, a small error in an address can cause you to lose everything you send. When I was a rookie, I solved this by sending a small amount first and seeing if it arrives. If that tenner arrives, the 5 million should arrive too, right? I still do this! Especially if you are a bit tired or distracted, this can happen to you just like that. "Don't be hasty."
  4. Listening to others. It doesn't matter who it's about. An influencer, a friend who knows all about it, a website (except ours of course) or a celebrity, don't listen to anyone! Only buy coins because YOU know exactly why you are buying it. You have researched and have a strategy and you stick to it. "Don't be a sheep".
  5. No patience. This reminds me of a funny meme I saw of a couple of traders who bought coins 5 minutes ago and under which it says, "When Lambo?" In other words, when will we have earned enough to buy a Lamborghini? With the exception of day trading, you will have to hold a coin long enough until you make a profit. It's not a casino! By the way: day trading is not recommended for beginners, as it has many snags and you need to be very precise in your trading. If you still want to do this, do it mainly with paper trading in the beginning, until your results are good enough. And read a lot about it.
  6. No discipline. You just do whatever and get whatever. You cannot build a house on that. You need a foundation. Some people gamble away and get rich. That is less than 1% of all traders. Most gamblers are out within 1 or 2 years because they have virtually nothing left. Disciplined traders work very purposefully slowly but surely towards results. You have to be willing to do that in this exciting world. You still want to compete tomorrow, don't you? Discipline and patience are the best character traits of successful traders.
  7. Invest money you will need later. There is only one rule: invest money you will never need. In all other cases, your portfolio may be so low at the time you need the money that you have to take heavy losses.
  8. Fear Of Missing Out. You put pressure on yourself to invest because you don't want to miss the opportunity. As a result, you buy coins that are way too high or those temporary hype coins that completely collapse after a while.
  9. Getting emotional. Whether it's fear, anger, frustration, or whatever, remember that the market doesn't care about this at all. The market will still be there tomorrow. And it goes up and down. Emotional decisions are one of the most important factors in mistakes crypto traders make.
  10. Watching the market all the time. While this is logical and understandable, don't let that burden your mind. You have a plan, so a day doesn't matter, unless you are a day trader of course. Even if the prices fall sharply, don't think about how much it cost you that day, but think about how much your trade will bring you when your moment comes. You also need to be confident! You didn't do all that research for nothing.
  11. You invest sky-high amounts right away. No wonder you get tense. You've sold your house, your car, your dog and your cat and you throw everything into the crypto market. Guaranteed to send you reeling if there is a red day in the market. So bet amounts you can easily afford. Build it up.
  12. Switch coins a lot. You sit all day watching all kinds of coins and get fed up with the coin you picked after many fives and sixes. You see a coin that is doing better. You sell your coins and switch to another coin. In doing so, you have to pay fees twice and you often buy a coin that is past its prime. Before you know it, you sell this coin again and switch back, a mountain of money and coins poorer. Try to trade with large amounts as little as possible. Invest, and sell when your goal is reached.
  13. Make typos when buying or selling coins. Never trade when you are stressed or tired. And if you have to, you will have to be very careful what you do. A typing mistake can cost you a lot of money. It really does happen to everyone. So pay attention when you type the price in a trade.
  14. Buy or sell at market price. If you are going to buy or sell, you will have to enter a limit price. Otherwise you are buying or selling at any price offered. This is similar to standing in the market and shouting that you will accept any price. Tip: that's not a good idea.
  15. Wishful thinking. You hold on to coins when deep down you know you should have sold them a long time ago. You know the market cycle and know there is a bull and a bear market. At the end of the bull market, you should actually sell, but you decide to wait until coins are higher again. Knowing that coins can lose as much as 95% of their value in a bear market, you then have to wait sometimes up to 4 years for your coins to regain that value, if they even ever get that high again. A lot can happen in 4 years. Sell your coins when you know the bull market is over.
  16. Not having a trading book. This means you don't know what you have done and it is much harder to learn from your mistakes.
  17. Trying to make up for losses by placing a big bet. Applying for a one way ticket to the exit is what I call it.
Did I do that?

What else are rookie mistakes or not is trivial. We move.

Storing crypto coins in obscure places

"What we learn from history is that people don't learn from history."
Warren Buffett

If you buy cryptocurrency you will also need to store it somewhere. Many exchanges have fallen over in the past. The almost legendary disappearance overnight of Mt. Gox is one that will never be forgotten. Huge amounts of Bitcoin were stolen in the process.

More recently, FTX toppled. Billions in value gobbled up by mismanagement. Even Binance no longer wanted to vouch for them.

These were once reputable exchanges with a large user base. In part, you can't escape this. What if Binance collapses tomorrow?

There are now huge numbers of wallets on the market. We are not going to tell everything about wallets here, we already did that in the linked article. We will briefly tell you something about them.

Cold storage wallets are the safest. These are the preferred ones. These are hardware wallets, generally speaking. If you want to be sure your coins will still be safe tomorrow there is no better place to store your coins than on a hardware wallet.

If you don't feel like doing this or if you trade a lot, you have no choice but to leave them online. In any case, do not put your coins on I don't know how many wallets, this will drive you crazy. Put your coins in no more than a handful of places, but preferably in 1 or 2. That way, you keep an overview and you don't have to change wallets all the time if you want to perform an action. Be careful with DEX wallets.

Securing your account

"It's good to learn from your mistakes, it's better to learn from other people's mistakes."
Warren Buffett

Many people think that stealing coins won't happen a lot.

Yet it is quite common. Your account should never be hacked. That is simple to solve. But you have to do that. Your computer is important, but your phone more important, because this is an NFT , so to speak. There is only one device in the world that provides the correct code in the Google Authenticator or Authy and that is your phone.

Even if they hack your PC and know all your passwords, your phone is your lifeline. So turn on 2FA and possibly other things like trusted addresses that coins may be sent to. Secure your stack, especially as your stack gets bigger and bigger.

What is also more often forgotten is writing down your seed phrase. If your Windows or hardware wallet crashes or is lost, how can you access your coins again? Keep all your seed phrases offline and together and make sure no one can steal this information. Also secure them against fire or water damage.

Better safe than sorry.

Getting scammed

Crypto scammer
"It's only when the tide goes out that you learn who has been swimming naked."
Warren Buffett

Again, we have already written an article on this. Crypto scams come in all shapes and sizes. For all the ins and outs, I refer you to that article. Be sure to read it, because it is indispensable in your crypto adventure to know these things before you fly full steam ahead.

Usually you get scammed because you are promised golden mountains. Then your reptilian brain takes over and you think you can take a quick hit, while the hit is being taken out of you. Maybe you needed to get rid of that lettuce anyway, but it really happens to almost everyone that you fall for it once, because you want to see if it's really a scam or if you're getting a big deal.

A good example is the pump and dump scheme. It's said that at a certain point, a lot of people are going to buy a coin and when the organizers shout "Now!" you have to buy. What happens is that the organizers have already bit by bit bought a coin with a low market cap beforehand and after they call it and the price goes up substantially, they sell their coins at market price and in no time the coin is much lower and you have lost a lot of money.

You can read the rest in the link above. Many people have lost money this way. Don't fall for it!

Buy new coins

"We don't have to be smarter than the rest. We have to be more disciplined than the rest."
Warren Buffett

Patience and discipline. Glue these words together.

Most of the coins that once had a good run have since disappeared from CoinGecko's highs again. When a coin starts rising substantially, it is tempting to join in, even without any research. Often you then buy a coin that starts its descent exactly after you bought it. Your luck, of course! Along with many other gamblers, actually.

The reason this is gambling is that you don't know if it's a good coin. If you want to know, you can look up our checklist in our article on that. It is not a bad thing to invest a small part of your stack in emerging coins, but then you need to know why exactly you are buying that coin.

Another common mistake is investing in memecoins or also called shitcoins. These have no function and are only known for their image of a rabbit or a cat, for example. You can gamble on these, but know that more than 99% of all memecoins disappear silently. Do you want to spend your good money on that? Yes, there are Shiba Inu millionaires, but how many people do you think have lost large sums of money buying obscure or worthless coins?

Moreover, a rug pull is often committed by the maker(s) of the coin. In a rug pull, the makers first let the pot fill up, this is called having liquidity in a coin. Say there is half a million invested in a coin, the liquidity is then half a million. If the rug pull is triggered, the coin makers throw all their coins on the market at market price. Within minutes, the coin is then at a value of 0 and they make off with that half a million.

Poor portfolio management

Portfolio rained on
"Invest in what you know."
Warren Buffett

If you are going to invest in crypto you will have to decide which coins you are going to put money into. This is a very important consideration. You also want to participate in this exciting market tomorrow. How do you get that done?

Many traders just buy and see what happens. That is obviously not a strategy!

For a good portfolio, you should mainly think about coins that have proven their value. They should be more than 4 years old, preferably even longer. In those four years, they must have been in the top 50 at least every time. These are reliable coins. You can easily check this in CoinGecko. Look at a coin's max chart and you can see how long it has been around and what its cycle is.

You will need to put about 50% of your stack in top 10 coins if you want to have a safe portfolio. Bitcoin and Ethereum are very stable coins to invest in. These will still be worth something tomorrow, heck. XRP and Cardano are also solid top ten clients.

Slightly higher-risk are coins like Polkadot and Chainlink. These coins are much younger and could well have a bad run.

Old-timers like Litecoin and Bitcoin Cash are also safe investments, although they rank a bit lower.

The lower you get in CoinGecko and the younger they are, the more risk.

The following is somewhat trivial, but a good ratio is roughly 50% very safe coins, 40% older top 50 coins and 10% "play money". 50% is then invested in Bitcoin, Ethereum, Cardano or XRP.

40% is invested in coins like Bitcoin Cash or Litecoin.

With that 10%, you can then best invest in promising new coins or some riskier projects. Divide it a bit so you don't put your entire 10% into a coin that might do nothing at all or disappear. Playing should be fun. Putting a tenner into a new memecoin with a nice picture, for example, is fine.

Letting profits evaporate

Money burning up
"The most important thing to do if you find yourself in a hole is to stop digging."
Warren Buffett

Profits are usually evaporated because people get greedy. One thinks that the coin will continue to rise, that you can sell it later and other wisdom you are selling yourself.

The fact is that many traders could have been quite successful if only one had grabbed the profits in time.

It also depends on your strategy, of course. A day trader may let his profits evaporate, but this is in the very short term. Tomorrow is another day when profits can be grabbed.

A swing trader needs to get his act together better. He needs to grab the profits when they are there. Otherwise, you shouldn't even follow that strategy.

An investor has a longer horizon. He invests in a coin after analysis and knows there is going to come a time when the market is going to prove him right. And then he strikes. If he takes his profits, at least.

We leave HODL and technical analysis aside for the moment.

However, the big moment of truth is at the end of a bull market. At that moment, you will have to decide whether it is. That is really tricky. But if you don't sell your coins then, you will be stuck with coins that become worth less and less. You must sell them then. Many people don't do this and sit behind their screens frustrated and angry. If only I had this and if only I had that. Or they sell afterwards at a big loss.

This is a tricky part of cryptocurrency trading. How do you know if the bull market is over? The answer? You don't know. You sense that. Experience and words like that. Gut feeling. However, you can put it this way: do you dare to take the risk that it's over and these coins are worth another 80% less or so? If you say no to this, it is probably best to sell everything or at least a very large portion.

Trying to time the market is incredibly difficult. Even experts can't do it. That's why experts use charts from the past to form an educated guess. They can also do this by simply setting stop losses at certain prices to protect your money.

Trading with leverage

Leverage trading
"Chains of habit are too light to be felt until they are too heavy to be broken."
Warren Buffett

If you are just starting out in crypto you may find that it all goes too slow. I want it all and I want it now! Quite understandable.

So you go in with a stretched leg! You go short on Bitcoin with a leverage of 10 and long on Ethereum with a leverage of 5 and gambles like that.

Live fast, die young!

Of course, this can go well, but it can also go completely wrong. Especially if you go all-in and still know little about the market, this can end your adventure before it has even started. Empty pockets are simply very inconvenient when you want to invest.

Trading with leverage is difficult, even for experts. If they do it at all, it will be with the handbrake on. They will probably bet a small portion of their stack of 5-10% and make sure that if the trade turns out badly they cannot lose more than their collateral.

In the beginning, try to take as little risk as possible and as you gain more experience, knowledge and confidence, little by little, take more risk, but never too much.

A funny ending to this chapter:

"My partner, Charlie, says that there's only three ways that a smart person can go broke: liquor, ladies and leverage."
Warren Buffett

So what should you do when crypto trading?

Happy trader

Let's throw in another basket of statements for a nice extro and for fun.

"Someone's sitting in the shade today because someone planted a tree a long time ago."
Warren Buffett

You prepare well and you buy coins with a certain intention. When the goal is achieved you sell the coins.

"Price is what you pay. Value is what you get."
Warren Buffett

If you see that a coin is underpriced you have to pay a certain amount for it, but you get a higher value in return over time.

"What the wise do in the beginning, fools do in the end."
Warren Buffett

At the end of the bear market, "the wise" buy back their coins. When "fools" start buying them, usually around the top of the bull market, they sell their coins.

"No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant."
Warren Buffett

Right. Patience is the best thing in the world when it comes to cryptocurrency.

"Never ask a barber if you need a haircut."
Warren Buffett

Never ask anyone how to do things. Before you know it, you'll be implementing their agenda.

"Calling someone who trades actively in the market an investor is like calling someone who repeatedly engages in one-night stands a romantic."
Warren Buffett

Overtrading is overpaying.

"If past history was all that is needed to play the game of money, the richest people would be librarians."
Warren Buffett

You can study until you weigh an ounce, eventually you will have to buy and sell coins to be successful. Those are the moments where you have to put what you have learned into practice. Here, knowledge must be multiplied by experience, increasing your effectiveness with leverage. This is the best way to trade with leverage.

"Intensity is the price of excellence."
Warren Buffett

This is the moment when everything comes together. You no longer have to spend hours studying or doubting a trade, all the work you have done in the past ensures that you know effortlessly what to do. Intuitively, you buy a new coin because after reading their website, you know it's a good buy. You sense when the bear market turns into a bull market and vice versa. You stay away from coins that sound good but end up collapsing. You are in "the zone".

"The most important investment you can make is in yourself."
Warren Buffett

Let's face it. Crypto trading is damn hard. Most traders fail because they lack substance. Invest that time in yourself, read a lot of books about it, study market cycles, research cryptocurrencies on their own websites or read about them at Anycoin Direct or wherever. Invest in yourself and you will see your results improve. Those who know everything will never be surprised.

"If you wait until you know everything it's too late."
Warren Buffett

A not so surprising connection to the previous quote. One day you will have to jump into the water, otherwise you will never learn to swim.

"You should never test the depth of the water with both feet."
Warren Buffett

If you take risk, do it in moderation.

"Losing some money is an inevitable part of investing and there is nothing you can do to prevent it."
Warren Buffett

If even the best investor in the world says this then you can sleep well if you suffer some losses one day.

"Charlie's dictum: "All I want to know is where I'm going to die so I'll never go there."
Charlie Munger

Damn, those guys are funny!

"If you don't find a way to make money while you sleep, you will work until you die."
Warren Buffett

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