How to Stay Safe when Buying Cryptocurrency

How to Avoid Common Pitfalls When Trading Cryptocurrency

With the promise of huge gains on the horizon, the cryptotrading sector is awash with both new and experienced traders. Influenced by the prospect of such gains, they often fall victim to some of the various pitfalls in the trading industry. These are by no means unique to cryptocurrency, they are however more prevalent and often times more costly in this rapidly moving industry.

With the help of this guide, the aim is that you will be well-versed to identify these pitfalls and avoid them as best possible. Some may represent calculated risks which can be acceptable depending on the current market status, whilst others are fundamental errors which we should seek to avoid at all times.

Cryptotrading can be a lucrative and enjoyable experience if you follow some key steps, it can also be a harsh and swift environment for those who do not. Therefore, before making your first trades, or even as a seasoned veteran of trading, you should always take your time to remind yourself of these key points.

Everything Begins with Account Security

So you have set up your first trading account on a reputable exchange- First, make sure it is indeed a reputable exchange, do your own due diligence through searches and review of past user experiences. There are instances of compromised exchanges and trading platforms, as well as outright scams perpetrated by the founders of projects such as the now infamous Bit Connect.

As with any major investment decision, or life choice in general, you want to ensure that your foundation is secure. There are many reputable exchanges such as CoinSpot or CoinBase, both of which are accepting of Australian users. These, along with a variety of other platforms, both centralized and decentralized have a host of different benefits and drawbacks. The onus will be on you to research which of these choices best fits your need.

When choosing a trading platform, you should be considering many factors such as your own trading volume, fees and commissions associated with each platform and the types of trading you wish to engage in. Crypto to crypto trading platforms can offer a liquid and low cost alternative if you already possess some crypto to trade with. Binance and Bitfinex are among the most popular and secure in this regard.

Besides the general security and reputation of the exchange you choose, the next huge factor is how secure you keep your own account within that exchange. Most exchanges in recent times require some form of 2-factor authentication. This is the first line of defense for your account and an extremely essential inconvenience.

Here are some additional measures you can take to ensure that your account stays secure.

  • Always enable 2FA (two-factor authentication) wherever possible or prompted.
  • Be certain to set the most secure password you can and make sure that this doesn’t match any of your other passwords.
  • Enable quality virus scanning software which can detect any system intrusions. Free anti-virus software is ok; you can download some quality free software from Avast. This will be sufficient for low volumes, if you are trading on a higher level though, you should definitely consider upgrading to a more premium level, paid alternative.
  • Avoid downloading any unknown or suspicious products, this includes that movie you really wanted to see that you found on a torrent site. If you are serious about trading safely, then you have to prioritize.
  • Make sure you double check that the site is secure each time you visit. There are many replica sites and ploys set forth by crooks to trick even the most experienced investors. Also, never open any suspicious email you may find has landed in your inbox.
  • If you feel like you can’t easily adhere to the security procedures outlines, then you should consider purchasing another machine for use with your personal life, separate from the computer you use for trading.

 

Storage Can Never Be Too Secure

When you have established yourself on a trading site which you are happy is secure, then you can begin to trade.

The next important security measure once you begin trading is how you store your assets. That means what kind of wallet you use primarily. This is a huge pitfall of many traders, most of whom continue to store there cryptos on the exchange they purchased them. This is a huge error and makes you a red-target for hackers. There have been many instances where the world’s largest crypto exchanges have been targeted and lost millions. Besides the goodwill of the exchange, you really do not have much comeback in this type of situation. Therefore, it is endlessly better to opt for a safer form of wallet storage.

You can read in depth about the different wallet storage options here. Briefly however, wallet storage can be broken down into a few major areas. Online wallets, mobile wallets, hardware wallets, and paper wallets. It is common belief that this also represents the order of how safe each one is. Online wallets being the least secure with paper wallets being the ultimate in crypto security, although quite the opposite in terms of convenience.

For the best options in the form of mobile wallets for Australian users, Jaxx Wallet offers a very robust and user friendly option with its built in ShapeShifter feature removing much need for traditional exchanges across certain tokens. Market leaders in terms of hardware wallet are both Trezor and Ledger Nano S, both of these offer supreme security for all of your holdings.

The only essential points you should note in terms of wallet security is to remember all of your private keys and back-up phrases and keep them securely stored. Without these, you will lose access to your funds completely. Another common error new users make is to give out their private key as opposed to their public key when fulfilling a transaction. This is something you simply cannot do and will likely result in the loss of all your holdings.

Only Fools Rush In

Now that you have your accounts completely secure and a plan in place for safe storage of your holdings, it is time to get down to the business of trading. Regardless of how much you are willing to invest, it is absolutely vital that you perform your own due diligence on a potential trade or purchase.

When trading crypto, it may just seem like digits on your computer screen, but always remember, you are answerable to your own accounts and balance sheet. A poorly researched or overzealous trade can really hurt your bottom line.

There are many factors involved when deciding what trade to make, and indeed a certain percentage of your decision will be based on your gut feeling. The majority however should be based on measurable information. There are some excellent resources out there on which cryptocurrencies to invest in. You should also keep a close eye on twitter for information close to all of your favorite projects. Market conditions are also a big factor. Even the best projects and coins can suffer under poor market conditions. This will test your ability to Hodl which we will discuss next.

Keep Cool under Pressure

As the old saying goes, “keep a cool head whilst all around you are losing theirs”. This could not be truer than in the world of crypto. Once you have made your first trades, it is inevitable that the value will fluctuate. This has been an ongoing characteristic in crypto markets from the beginning.

Many new traders simply panic. If they notice that a trade is losing value they may be inclined to sell their position only for the price to begin rising again. Caught up in the wave of uncertainty and a fear of missing out, they again rebuy at a higher price point. You should try and avoid this situation at all costs. There are a number of ways in which you can help yourself to avoid this situation.

If you have researched your trade well, you should have confidence that the price will rise in the long-term. In this case, it is best to hold on to your original position as long as you can or until you have reached your sell point.

Never invest more than you can afford to lose- This is a crucial factor and one which you will hear time and time again, only because it is so true. By investing more than you can afford, you automatically put yourself in a pressurized position. This pressure leads to you making erratic trading choices. This type of speculation is much akin to gambling and not recommended at all. A common rule of thumb in the crypto world is that you should invest an amount that you are happy to lose 100%.

Try to avoid checking your balances constantly. This can also put you in a position of mental stress and lead to a situation where you feel the need to make unnecessary trades.

Keep an Eye on your Holdings

A slight contradiction given the last point about trying not to constantly check your holdings. It is advisable though that you keep some kind of regular monitor on your crypto values. Usually a once daily view of your holdings could be sufficient, this will of course depend on the frequency of your trading and the investment strategy that you have. There are some great portfolio trackers on the market for viewing and keeping track of your holdings. Two of the most popular which offering mobile capability on both Android and iOS are Delta and Blockfolio.

Don’t Become Emotionally Invested

This is one of the most difficult aspects of trading anything. It is often what separates traders from non-traders. That is, the ability to detach themselves from the emotions of a trade or investment.

It is almost certain that you will experience bad trades and losses in your crypto trading path. The important key to remember is not to chase these losses. This can often lead to disastrous consequences as your ideals become skewed. This is another key reason why you should avoid expensive margin trading accounts as best possible. We need to only look as far as the famous story of Barings Bank to know how such losses can spiral out of control quickly.

Final Thoughts

The crypto world, especially at the current moment, is one which is filled with both a fear of missing out and a lot of biased misinformation. You need to work hard to maintain your focus and not be distracted by these external factors. Presuming you can do that, you need to be strong, organized and calm to manage yourself and the other internal factors involved in crypto trading.

If you can manage to control all of these aspects sufficiently, you are well on your way to becoming a successful crypto trader. You will certainly make mistakes along the way, however, by taking some guidance from the steps and strategies in this article, we hope you can navigate a successful course on the crypto coaster. The most important things to try and remember are that every decision begins and ends with you. If you approach things in a calm, balanced and decisive way, you have already won half the battle.

The views expressed in this article merely represent the opinion of the author. They are not intended in any way as professional financial advice. You should always consult with a professional advisor and only risk as much as you are willing to lose-

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