According to Chainalysis, the crypto market in South Africa has been steadily growing between 2020 and 2021, to the point they ranked in the top 20 for global crypto adoption.
More and more people are turning to cryptocurrency as a prospect for investments. However, many beginners jump into the crypto market before fully understanding it, resulting in unavoidable mistakes that cost them their money.
Fortunately, Crypto in Afrika created this guide for beginners, which includes crypto trading tips and common mistakes to avoid.
Cryptocurrency trading: How it works
Crypto trading is when investors speculate on the value and price movements of the currency by acquiring assets through a Contract for Difference (CFD) trading or through an exchange platform.
Exchange platforms facilitate buying and selling crypto assets and provide information on the crypto market through charts. This includes graphs that show the margin of the rise and fall of the market for investors to know if their investment will make a loss or profit.
When buying crypto through an exchange, remember that some platforms are centralised. As a result, they don’t run through blockchain technology and would require you to provide personal information to purchase.
10 crypto trading mistakes you should know
It’s common for new investors to make mistakes as they begin their crypto venture. However, learning from previous situations that led to income losses is essential, so you don’t repeat the same mistake. To help in your decision-making process, below is a list of crypto trading mistakes to avoid:
1. Investing real money before you’re ready
One common crypto trading mistake most newbie traders make is investing all their funds before properly conducting research and learning the ins and outs of the trade. It’s a detrimental move that often results in money loss.
A way to combat this is through paper trading, a simulated crypto market environment that allows you to write down your buying and selling decisions instead of using actual currency to trade.
2. Not developing a risk management plan
Risk is part of making any investment, and some people tend to underestimate this factor when investing. Minimising losses or stopping loss altogether can be achieved when implementing a proper risk management framework.
This can be done by formulating a solid trading plan by researching and analysing the market to prepare for different outcomes. Some of the most effective strategies include only investing what you can afford to lose and setting realistic expectations before acquiring digital assets.
3. Disregarding market analysis before investing
Another common mistake in crypto trading is impulsively buying crypto assets without conducting proper research to gain information about the market. This lapse in judgment often impacts new investors negatively.
Instead of rashly buying crypto assets, develop a plan of action to gather information such as reading whitepapers, grasping the basics of trading and researching the token you want to invest in and learning about evaluating which cryptocurrency to invest in.
4. Choosing the wrong exchange platform
Start trading in crypto by acquiring digital assets through an exchange platform. However, with so many exchange sites, many fall for questionable sites.
When deciding which platform to buy crypto coins from, it’s important to visit the website and see whether it’s reliable. Verify this by checking all their offered features, including the available crypto assets, charts for crypto market value, and if they provide a wallet for your funds.
If you need help determining if the exchange platform is good, you can use lists and reviews from reputable sites for reference.
5. Failing to maintain a trading journal
One strategy most new investors disregard is producing a trading journal to keep track of each investment. Maintaining entries of your investment gives a record of your trading history of transactions to help you keep track of your asset’s performance.
Failure to possess a trading journal is detrimental to an investor, especially when you want to maintain a successful investment portfolio. Aside from tracking your asset, it’s important to maintain a journal to efficiently distinguish what’s going well and where to improve your investment.
6. Lack of investment resources
As an investor, you need to make sure that you have enough resources to start trading. While learning the process of crypto asset ownership is relatively easy, it doesn’t come for free.
You have to be prepared for trading fees which vary depending on the exchange. For this, having additional funds if you intend to store your crypto asset on a hot wallet or a hardware type of cold wallet is helpful. But despite these initial costs, investing in crypto promises wealth through your earnings will be reaped when you invest efficiently.
7. Staking low and expecting high
The crypto market is highly volatile since the value of crypto assets is tied to public demand. Some new investors make the mistake of buying a large amount of crypto during a crash since the costs are much lower, and they expect to gain high returns when the market stabilises.
While this gamble can pay off, it’s better to study the behaviour of the crypto asset you intend to invest in to consider different factors. Among them is marked demand; if the public interest is dwindling and fewer people are investing in the asset, it’s likely a doomed investment.
This is why it’s crucial to be strategic when making a crypto investment; when you have a clear buying intention and plan, you won’t let your impatience motivate your actions and invest before the time is right.
8. Letting emotions influence your trading decisions
Being too emotional is a pitfall when it comes to investing. As an investor, it’s important to remember that crypto investment is no joke and any money you stake is at risk of getting lost if you don’t use your good judgment.
Be sure to be in a good emotional state before making any crypto trades; making decisions based on the influence of bias or greed will result in bad results. Smart investors make sure they analyse the behaviour of the market before making any decision so they can properly manage possible losses or gains.
Consequently, being emotionally prepared is also a good practice since many things can happen when investing.
9. Not engaging with margin trading as a beginner trader
Margin trading is borrowing money for crypto trading due to a lack of funds. While it’s not technically illegal to do this, it’s important to be careful with funds loaned and spend it wisely to pay it back quickly.
Make sure you avoid taking unnecessary risks and be mindful of the present state of the crypto market so you can invest quickly. Alternatively, if you’re being asked for a loan, remember only to give what you can spare.
10. Letting FOMO mentality cloud your judgment
So many new investors start trading in crypto because it’s a popular concept in today’s digital space; the FOMO or fear of missing out mentality influences their decision to invest even before they’re ready.
There’s nothing wrong with learning about crypto trading from seasonal trends online, but popularity shouldn’t be your sole reason for investing. Study the market state and learn about the available crypto assets before staking your money on crypto tokens.
How to avoid common crypto trading mistakes
Being logical and level-headed when making investments is important if you want to be a smart crypto investor. To do this, you must develop effective trading methods and strategies that positively affect your investments.
With a solid plan, you won’t have to worry about how to avoid crypto trading mistakes because you’ll already have a comprehensive plan to face any risk involved in crypto trading.
Aside from learning tips on how to get rid of crypto trading fears, we’ve listed a couple of strategies you can use below:
- Diversify your crypto portfolio
Since the crypto market is still evolving, it’s important to have a diverse crypto investment. Investing in BTC, ETH, USDT, and more tokens will ensure you don’t suffer huge losses when one crypto crashes.
- Conduct comprehensive research
As an investor, research is the most important thing you need to do before making any investment decision. It ensures everything you do is banked on facts instead of relying on what others are doing.
Additionally, conducting comprehensive research on the crypto market and the token you want to trade will allow you to properly prepare your finances before finalising the trade.
- Remember the HODL method
Hold on for Dear Life or HODL method so you don’t prematurely sell your assets when you could have gained a bigger profit.
The crypto market is largely volatile for many reasons, meaning its value often increases and decreases at irregular intervals. Practising this strategy allows you to mitigate losses from unexpected price swings.
FAQs on crypto trading
How to start trading cryptocurrencies in South Africa?
Learning about the current crypto market state and analysing the benefits of different crypto assets you can acquire before trading in South Africa. Once you’ve accomplished both, the next step is determining the best crypto exchange platform to purchase.
What is the best cryptocurrency to trade in South Africa?
With thousands of crypto coins to choose from, it takes time to determine which is the best for South African investors. The token you’ll invest in depends on your preference in line with its market performance when choosing a crypto asset you want to trade in.
How to make money trading crypto in South Africa?
Actively buying and selling crypto is a good way to make money, but only when you take advantage of the volatile market. The way to do it is by adopting a daily trading strategy by analysing the market and taking note of the pricing before investing.
How to get into crypto trading?
If you’re interested in crypto trading, it’s important to begin by conducting thorough research. Many investors have gained profit from crypto trading, but only because they understand the crypto market and they know how to analyse it properly.
How much money do you need to start crypto trading?
You can start trading in crypto depending on the minimum purchase rates of your chosen crypto. You should be prepared to stake a larger sum if you want big returns.
Where to start crypto trading?
Depending on your trading skills and preference, a wide range of exchanges is available in the market. Some top exchanges you can find are Kraken, Binance and Coinbase Exchange. However, be wary of the platform’s credibility to ensure the safety of your funds and information.