Cryptocurrency Investing: Top 4 Reasons Why The Average Trader Fails


Yes, you read that correctly. In this introduction to cryptocurrency investing I will explain to you the top 4 reasons why most traders fail. And by fail I don’t mean go bankrupt, though there will be some who do. By fail, I mean they will constantly make trades that cause them to lose money bit by bit, buy and “HODL” a coin that doesn’t go anywhere, holding coins that are on a bear run, and investing into an ICO (Initial Coin Offering) that falls flat on its face.

So now that I have your attention, here are the top 4 reasons most traders will fail.

1) Not doing your own research on “Coin X” before buying

Unlike most articles, I’ll tell you what I believe is the most important reason first. I honestly can’t stress this enough and if you read more of my articles, you’ll see me repeat this phrase as if it’s my mantra. Actually, I will call it my mantra. This mantra should be written on a sticky note, placed on your computer screen, written on your bathroom wall, and repeated daily.

Don’t get me wrong, there will be people out there who really know what they’re talking about and have a strong grasp on “Coin X”, but for every ONE of those individuals, there will be another ninety-nine who don’t know anything and are jumping on some bandwagon. This is a very dangerous thing because if you invest in “Coin X” with zero research, you run a much higher risk of losing most or all of your investment.

This is your money that you’ve earned. Money that will hopefully work to build you and your family a better life in the future. Don’t leave that in the hands of people who potentially (and most likely) have done no research and are just following someone else’s word. They don’t have to pay your bills if things do not pan out. So, if you haven’t heard or seen it before, D.Y.O.R (do your own research). ALWAYS.

2) Risking money that you don’t really have – or risking extra on margin trying to get rich quick

You will notice that I said “risking money” not “investing money”. Remember, no matter how much research you do, no matter how good you are at reading charts and patterns, you are always putting your money at risk. The more research you do and the more you read up on patterns, the more you will reduce the risk. But it is still a risk. And when you risk money that you need in 30 days to pay bills or money that you borrowed from your local loan-shark so you can make “big bucks on them cryptos” (I actually know a guy who did this – but that’s a crazy story for another time), you bring the most volatile things into a market that is already extremely volatile – fear and panic.

Fear makes you pull out your money because it’s going down, just to put it right back in when it goes back up. Fear makes you try to find the “highest and best point to take a profit” or the “cheapest and lowest point to buy-in” when even the best of traders will rarely hit the highest highs and lowest lows.  This eventually causes you to chip away at your money, little by little until you leave the market frustrated and in a worse position than when you entered.

The approach you want to take with this is one so simple that it’s scary, yet almost no one does it. Never put in more money than you can afford to lose. If you need to pay rent next month with that money, don’t invest it. Risking money irresponsibly will only cause problems down the road. Even if it pans out for you one or two times at the beginning, all the best traders take some losses, so don’t dig yourself into that ditch.

3) Knowing the right time to pull out…

Of course, I’m talking about when to pull out your profits and/or your initial cash investment. In cryptocurrency, it’s quite possible to wake up in the morning and see you’re $500 richer and then in the time it took to prepare and eat breakfast be $1,000 richer. And then to come home from the gym and see that you’re now $1,500 richer.

It gets really hard to say “Okay, now it’s time to take my profits”. This won’t apply so much to someone who HODLs (holding long term), but for a trader, knowing this magic number of when to sell will essentially be what helps you continue growing your wealth.

Since I’m a day trader myself, this is something I can go on about for days, so I’ll try not to keep it brief and not get too descriptive. After I’ve done a lot of research on a coin I’m looking to risk my money on, I make a decision on 3 things BEFORE I click that green BUY button.

First – What am I going to do? Am I going to HODL long-term, short-term, or quick-profit-trade it?
Second – How much of my money am I willing to risk on this position?
Third – At what % of profit or loss will I take some or all of the investment off the table?

These are questions that you really need to sit down and decide based on your risk tolerance. This is in a sense, your game plan – which will help you always have a guide as to what kind of money you’ll be risking. You must stick to it and avoid the temptation of greed because, in this market, it’s really easy to get greedy, and even easier to get burned because of it.

For me, I book my short-term hold profits between 15-25% percent, my swing-trades from 20-40% and my “HODL” coins I’ll take out my initial investment after realizing 200% profits and then start taking off some more after 400-500%. This was a rule that I followed religiously for my first year of trading.

Your percentages may be completely different than mine or you may be a 100% HODLER, but no matter where you are or what you do, have a game-plan. It will change your life. You won’t be swinging up and down with the market, but waiting for the market to come to you.

4) Not being able to admit when you’ve lost, A.K.A knowing how to use a stop limit

No matter how long you’ve been trading or how much money you’ve made off “Coin X”, there will come a time where you will have a coin that is just plain murdering your overall profits. Sometimes it changes course and everything is all peachy, but usually, that bag just gets lighter and lighter. I want to tell you that It’s okay to sell at a loss. In fact, don’t be afraid of it. Just like I said above about knowing when to pull out your profits – Know when to cut your losses!

One of the best ways to always ensure you cover your ass is to use the stop limit. This can be used with people who plan to HODL but should almost always be utilized by a day trader. The “crypto world” is the Wild Wild West of investing. One-day Verge might be killing it, claiming to be the coin of the year, and then all of a sudden, the next day it tanks and you’re sitting there talking to yourself like, “It’s coming back, this is my HODL coin, I got this”. Shortly after, you realize you’ve just lost all your profits from the previous week.

This happens to a lot of people because they didn’t use a stop limit and ended up losing 30% of their investment and are then too afraid to pull out while hoping it will reverse back to the moon. Admit when you’ve been defeated, it allows you to jump into another opportunity sooner and recoup those losses with new winning picks.

So, there you have it. My top four reasons why average traders fail. Though there are many other reasons that can cause someone to not realize the profits they could in a market as good as this one, these are a good starting point for people to consider when they begin to venture into this new and exciting market.

How can you begin investing?

You can buy Bitcoin, Ethereum, Litecoin, and Bitcoin Cash on Coinbase. Then to buy altcoins, you will need to transfer Bitcoin to an account at Binance in order to exchange it for any altcoins. If you get stuck or need help, send us a message through our Facebook page or contact page and someone on staff will walk you through the process.