5 tips to avoid losing money trading bitcoin

“Don’t trade, you’ll lose your money,” jokingly says Scott Melker, one of the most renowned analysts of bitcoin (BTC) and the US cryptocurrency market. Although it is a joke on Twitter, this sentence contains a harrowing truth. When we invest our capital in a financial asset, there is always a possibility of losing money, especially when we are in a bear market.

However, making your money make more money is the dream of many. And no matter how much risk trading activities, or any investment method, generate, more and more people are deciding to take their savings or even their salary to generate profitability. In the case of the cryptocurrency ecosystem, there are many who dream of getting rich buying bitcoin or altcoins.  

Sticking with only the face of wealth and success can be a beginner’s mistake for those taking their first steps in the cryptocurrency market. Investing is not always winning, but rather an activity of resistance, mettle, experience and endurance in the face of failure . Because yes, anyone who has invested even 10 dollars in any market knows how easily they can be lost.  

If you’re a new investor or you haven’t been doing well in the crypto market lately, I’d like to talk to you today for a bit. As a reporter in the field of finance and markets, I have seen too many people despair over the losses their investments generate and some experienced traders accept their mistakes with resignation. I have also invested: I have lost a lot of money by not following the advice of others, I have also gained by being patient. 

That is why below I will list some of the advice that I try to tell myself when my investment is not going well, as well as some tips that I have learned thanks to the experiences of others and the knowledge of investors with long standing in this market.  

Here are 5 tips if you want to start buying bitcoin and other cryptocurrencies to make money .

Do not invest more than you can afford to lose

Let’s start with the most basic and obvious. It is never a good idea to invest money that you have committed or cannot risk losing it. More than a few people decide to use their life savings, committed money to buy a house or car, or take out loans that they cannot cover, in order not to miss out on the “opportunity of their lives” to make money. However, it is never a good investment opportunity if by betting said capital you can be much more impoverished .

At the debacle of Earth

The Terra/Luna case, which occurred in the bear market of 2022, is a good example of what should not be done. Many investors bet the money of their families and even their homes when they saw that the currency was giving it a lot of performance. When the project collapsed, they lost everything.

When it comes to your first investments or hard-earned money, it’s best to be conservative. Keep in mind that investing is contributing to a possibility that the market will behave in one way or another, and although you can always analyze the past movements of an asset and be aware of events that may affect it, there is a chance that your analysis will be wrong or something unexpected happens that changes market expectations.  

In this sense, everyone who invests has to be open to the idea that they can lose the money they have. Starting with a not very high amount, as well as with money that you do not need immediately, is a good option. Likewise, you can invest progressively, while you gain more confidence and experience, you can add more money to your operation and even try your luck with other market alternatives, such as derivatives or cryptocurrency loans. 

Don’t be greedy, don’t get carried away by FOMO and emotions 

Many people invest more money than they have because they are filled with greed. Some even enter the market at the wrong time for fear of missing out on an opportunity that will make them rich overnight. Easy money does not exist, just as investors should not base their investment strategies on a fluke .

Falling in FOMO equals losing

All markets experience from time to time what is known in English as FOMO, translates to “fear of missing something.” When in 2021 the Bitcoin market registered one of its best bullish movements and was reaching $60,000 per unit, many investors bought BTC for fear of missing out on the investment opportunity. However, this euphoria only made them enter the market at a time of much speculation, when the most experienced investors left the market to minimize possible losses.

If you are one of those who get nervous and impulsive when you see a price chart, or rush to buy/sell when the market turns red or green, you better have a glass of cold water and calm down before making a trade. financial. Emotions are not friends of money, neither are premonitions. Between euphoria and panic, there are many traders who can lose large sums of money.  

Entering the market because everyone is investing is not a good idea. Exiting the market because everyone is selling is also not a good idea. Do you know why? Because it shows that the person who gets carried away by these two waves of purchases and sales does not have a clear investment strategy, a plan to operate his money, much less has he planned the riskiest scenarios. All red flags! 

It is true that sometimes a stroke of luck can benefit you when investing or some intuition (based on previous experiences) can help you get out of a risky situation. But, it is always more effective to invest based on market behavior analysis , under a fixed profit strategy and open to the various scenarios that can occur with an asset such as cryptocurrencies.   

Always do risk management

Due to all of the above, it is always important to manage risk. The losses of an investment can be controlled and even programmed. The most experienced traders are always open to the possibility of losing money, because they know that it is part of the trade. But instead of passively accepting this fate, they decide to explore the different scenarios that can occur with their money, thus limiting the chances of losing it all .  

In order to reach this level, it is essential to know how and when you want to generate money with your investment. The way you want to generate returns increases the opportunities for risk, as well as the ways to counter them. For example, if you are a person who wants to take advantage of price volatility and make several trades in a matter of days, then it is important that you learn how to open stop-loss trades to get out of the market when the price falls more than you expected. you are willing to lose. Similarly, place some take-profit orders to exit when you have achieved your goal and take profit.

An experienced trader sees the positive and negative scenarios

When planning an investment strategy, a trader calculates how much profitability a specific operation will generate if the most favorable market factors are met. Likewise, he will take into account what must happen for you to lose money in said operation and how much you could lose. In this way, he will keep both his profits and possible losses in check.

On the contrary, if you are someone who wants to hold (save) their money in the long term, it would be good for you to analyze what would be the most appropriate moment to enter the market and for how long you will leave said capital untouched. Likewise, you can invest all your capital in one go or periodically accumulate money in your cryptoactive account, which is also known as DCA.  

In all cases, it is important that, if you want to invest in an asset, you get to know it first , read news about its ecosystem, study its operation and see the possibilities it has in the market. 

In the same way, it will help you to internalize that what differentiates a trader who lasts in the market from one who does not, is the planning of losses. A trader who knows how to manage his operations will always have a second chance to continue investing, since he will not have lost all his capital in a single attempt.  

Beware of social media gurus

Hand in hand with investing based on your emotions and not developing a clear investment strategy, another common mistake is entering a market because your favorite influencer told you, a relative advised you, or you saw it on a social network! Red flag! : maximum loss alert! 

Although there are experienced traders and analysts who are dedicated to sharing their knowledge on Twitter, YouTube and even Facebook, not all people have good intentions . Some may recommend a bad investment or even a scam token out of ignorance; others because they have the opportunity to enrich themselves at the expense of the most unsuspecting. On that note, don’t follow any advice that promises you an opportunity that is too good to be true.

The evil at the heart of crypto-finance

Under the promise of generating profits, many pyramid schemes and multi-level businesses offer the possibility of making money based on cryptocurrencies. However, these business models only enrich their creators and main members, while the other clients are exposed to the possibility that they will escape with their money or the scheme will go bankrupt.

Listen to experts on the subject who, instead of giving you investment advice, will give you tools so that you can analyze and monitor opportunities in the market for yourself. In the same way, do not marry the opinion of a single person, compare graphs from different specialists, read about the market in general and risk learning to read a price graph. Soaking yourself in the greatest amount of quality information can be a before and after in your journey as an investor .  

Study, study and study

The last piece of advice is also very obvious, but it is the one that is avoided the most. A good investment is based on the experience of the trader and his knowledge, not on luck or advice from third parties . Instead of reading the tweets of Elon Musk, Robert Kiyosaki or Bukele, and running out to buy some bitcoins and dogecoins, it is better to spend a few hours of your life reading news that affects asset prices, taking trading classes and learn to open market orders that help you schedule your investments.  

I am not an expert in trading, nor do I claim to be, but a few years ago I was too scared to invest even $10 in the cryptocurrency market. Thanks to the constant contact with the ecosystem and the interest in how a trader behaves on a psychological level, I began to become passionate about the subject and ended up doing my first operations. Not all of them went well, but I think I haven’t lost that much money thanks to the knowledge I’ve gained over the years.  

For this reason, I recommend that before you even think about buying bitcoin, ether or dogecoin, you fully understand these cryptocurrencies and the risks involved in putting money in their markets. The more tools you have to protect yourself and you gain experience over time, the easier it will be for you to overcome difficult moments such as the bear market that we are experiencing today.   

However, it is always important to remember: not even the most experienced trader is immune from screwing up.