Why do novice traders blow their accounts?

The cryptocurrency market gained its popularity due to the high volatility of the assets represented on it and due to the significant increase in the value of the first cryptocurrency, Bitcoin.

In 2008, you could buy up to 1,500 BTC for $ 1, while the price for 1 Bitcoin in December 2017 increased to $ 20,000, making the whole world hear about the existence of cryptocurrencies.

Many professional traders or ordinary investors who bought Bitcoin in time got pretty rich. Many others who tried to have a home run in the ninth inning with the bases full and were learning the basics of trading along the way, lost all their funds on their trading accounts.

So what is the reason that some people lose money by investing in a developing industry, while others at the same time get their profits?

It may sound new for you, but the profession of a trader is one of the most difficult ones in the world. Choosing such an activity you stay face-to-face with your fear / greed every time you are going to make a deal.

The main difficulty in trading is emotions, not the choice of the entry point to the transaction, technical or any other analysis, lack of strategy or a clear understanding of the risks. It is because of emotions that most new traders lose their money.

Over the last 2 years, many independent studies showed that 25% of the cryptocurrency market participants earn on a stable basis, 15% remain with their funds, and 60% lose. Some of them lose the deposit completely only once, and some lose the deposit 2 or more times.

If we look at the results of surveys in classical markets, you can see an even more terrible picture, that only 10% of participants earn on average. Therefore, you have a much greater chance of making money on cryptocurrencies.

Usually the deposit loss is caused by the following:

• Trading without any skills and knowledge and the lack of a system or strategy for making the transactions;
• Margin trading and use of overstated leverage (loan on the exchange);
• Lack of understanding of the Money and Risk Management Basics;
• Lack of proper use of transaction insurance tools;
• Fear and greed, desire to win back, an itch for gain and high emotional stress;
• Lack of diversification of their assets and their storage on unverified platforms and shady exchanges;
• Absence of pauses or breaks between transactions (especially unprofitable);
• Investments in alternative cryptocurrencies (altcoins) with the goal of their long-term retention;
• Following the pseudo-gurus or “professional” traders, who are just ordinary scammers in fact;
• Using cheap trading algorithms or “robots”.

Let us examine these reasons in more detail and how it is possible to minimize the losses.

Trading with no knowledge, no system and no strategy

The main mistake of beginners who want to trade cryptocurrencies is acting before they have the necessary knowledge. Of course, the desire for quick money and fear of missing the moment can be the reasons for it, but with this approach you are more likely to lose your money.

The cryptocurrency market has high volatility which makes it impossible to sell assets at peak prices (even having previously bought them profitably) relying only on their intuition.

You won’t have any success without a precise, well-thought strategy and a system which you are ready to follow every day, also during the search for this strategy. Every experience has its price.

The beginners who want to make a quick profit trying to catch the highest price of an asset will be able to experience the consequences of such careless trading.

At first glance, an attractive price may actually be a peak with the following rapid decrease, which can lead to the loss of most of your investments in the asset.c

To reduce the risks caused by the mentioned above attitude to trading, you must gain basic knowledge and skills in the field of technical, fundamental, volume analysis and wave analysis. It is also necessary to learn how to work with charts and get into the root of projects, study public sources, try to find out information, details or tips. It is necessary to study the existing types of cryptocurrencies and specific projects intended for investment.

Simba.Storage analysts recommend that beginners take cryptocurrency trading with the utmost seriousness and warn that without years of your own practice it is more likely that you get the worst of it at the market.

During your practice you can lose the critical shares of your trading and investment portfolios or undergo expensive training from highly qualified traders that you also have to search carefully.

An alternative to this option is a long-term retention of Bitcoin that is growing every year stored in a reliable Simba.Storage. You can also diversify your asset which will allow you to cover both options and reduce risks, as a trader is often an investor.

The basic rules of cryptocurrency trading

There are not many trading rules, they do not require a lot of work from market participants, and it is not difficult to follow them. Usually 99% of traders already know or agree with these principles when they are asked about the basics of Money and Risk Management or share basic knowledge with beginners. However, most of these traders continue to neglect them, which leads to large losses and even a complete loss of the deposit. The reason for that is that knowing and understanding is one thing, and facing difficulties in practice is another.

The fastest way to get rid of your money is to spend all of it for any altcoin (a cryptocurrency that is an alternative to Bitcoin). This is a violation of Money Management and the rules of portfolio diversification. As a rule, only beginners make this mistake and subsequently sell their assets when the sharp fall in prices, moved by fear of the further decrease. They do this until they lose their entire deposit.

In the case of margin trading, there is such a risk as the liquidation of a position secured by the entire volume of a trading account or a specific transaction, which will lead to an instant loss of all funds. The greed of inexperienced traders often speeds up the liquidation process because of their choice of a large leverage.

Many newcomers often get carried away, try to recoup and do not stick to the plan of setting goals (if any), which does not lead them to the desired profit. Driven by greed or fear of opening a deal when it is necessary they often see everything only negatively, become disappointed in the entire cryptocurrency market and have no money on their account in the end.

If trading is something new for a person who is a newcomer in the cryptocurrency market, then he will make a number of mistakes, such as assets acquisition at the value peak, lack of attention to their positions for a long time, neglecting stop-losses or put them wrong and so on.

Long term investments

Another reason for blowing the account is the acquisition of altcoins in a situation where investors don’t plan to trade them actively. It can also be the acquisition of project tokens, funds, which in fact are pyramidal fraudulent schemes that promise high interest on deposits of your cryptocurrency, fiat funds or simply withholding tokens for receiving additional profit on the liability, as a reward for retention.

It is important to understand that if you want to do passive trading or just buy cryptocurrency for long-term storage, then Bitcoin will be the most reliable asset for you. It was always like that before, it is still like that now.

Despite the volatility of the Bitcoin price, the cost of this top cryptocurrency remains high, moreover, the annual progression influences the price increase. Legalization of BTC is happening all over the world, and the growth potential of the asset price makes it extremely attractive for long-term storage, thanks to its world wide acceptance as a payment system.

Although many analysts continue to make dubious forecasts that 1 BTC will cost millions of dollars in the near future, there are real perspectives for a significant increase in Bitcoin in the coming years. This is caused by both growing interest from investors and ordinary people, and the limited issue of Bitcoin. That is why Simba.Storage offers the services for its safe and comfortable storage recommends stocking up on Bitcoin and.

Pseudo Gurus and Unstable Trading Tools

In addition to the main difficulties of the trading activity itself, the beginners often fall into the trap of unprofessional influencers without making a detailed analysis beforehand. Such people provide paid subscription services for private channels with trading recommendations or so-called signals that contain other people’s information from public access just in other forms or that kind of information that can not bring the subscribers to desired results due to the lack of proper competence of such gurus.

Another critical mistake is to use one of various algorithmic trading systems. Automation is certainly good, but the owner of the “ideal”(so to say) algorithm has no need to share it with others or sell it for a small price. There are no miracles, just as there are no perfect algorithms.

Trading or investing

The analytical center Simba.Storage includes more than 12 people. The company has analysts, traders and other experts with experience in the cryptocurrency market for more than 3 years. The company itself plans its development for decades together with the growth of Bitcoin over time. That’s why we consider it our duty to point out investment as one of these two activities. Investing has more advantages than classical trading, in terms of time and financial costs, possible emotional stress and nervous breakdowns.

Profitable trading over a long time is hard work, and if you don’t have the opportunity to invest enough time in this profession, it is much better to invest and observe the changes in your portfolio, which won’t require similar workload and a lot of effort.

And like icing on the cake, the investment can be much more profitable in the end, given the annual increasing progression of Bitcoin in comparison with a small percentage of successful traders in any other markets.

Simba.Storage clients also choose to invest in Bitcoin, because it can be exchanged for SIMBA storage tokens that are pegged to the BTC price. After that you can use custodial services for cryptocurrency storage on hardware wallets in Switzerland and Liechtenstein and you may rest assured about your investments.