Once seen as only something those with a lot of financial knowledge entered into, cryptocurrency trading has now become more mainstream, and as such, more and more beginners are opting to get involved in buying Bitcoin. However, trading Bitcoin can end up losing you money if you don’t know what you’re doing so it’s best to be aware of the most common mistakes new traders make so that you can avoid them.
We’ll take a look at the most common beginner mistakes here.
1. Following the Wrong People’s Advice
If you’ve never traded Bitcoin before, it’s a good idea to find someone knowledgeable in the subject to help you with your trades. However, these people generally cannot be found on general Bitcoin forums, and social media sites like Twitter and Reddit.
The internet is full of advice regarding cryptocurrency trading, but if it was all legit, we’d all be millionaires by now. Some of the advice is also from people who are simply trying to increase the price of the coins they themselves are holding.
Before believing what they’re saying, make sure they’re a true expert in the niche.
2. Having No Investment Plan
As an investor, you need to work out how much free money you have available before you can start investing. Perhaps you want to purchase your Bitcoin in one lump sum, or maybe you want to gamble a small amount each month on a Bitcoin CFD. Whichever you choose, you don’t want to overextend yourself.
In addition, your investment plan should also include stop-loss limits and profit targets so that you are aware of the best times to buy and sell.
3. Not Storing Your Coins Securely
As Bitcoin is a digital currency, it can’t be stored in the same way as a dollar bill can.
Instead, you need to store it in a secure digital storage device. Whether you want to store your coins in a paper wallet or a hardware wallet is up to you, but it’s important to note that not all digital coins can be stored on hardware.
Once you have stored your coins, you need to ensure that it is safely secured in your home. A locked safe is ideal.
4. Ignoring the Tax Implications
Once Bitcoin made its way into the mainstream, tax authorities started to take notice, and are now keen to ensure that cryptocurrency trades are appropriately taxed.
The rules on this vary depending on the country you are located in, so we won’t go into specifics, but it’s very important that you are aware of your responsibilities before getting started.
Apps like Bitcoin Tax and CoinTracking can help you with this, as can an accountant if you’re struggling. Fail to declare what you’ve earned, though, and you could end up with a fine.
Cryptocurrency trading is still a good industry to get involved in 2020, but it’s important to do your homework and keep the above mistakes in mind.