Top 8 Crypto Trading Mistakes to Avoid in Malaysia

Categories: Crypto Trading  

Tags: Crypto Trading  

Publish date: 2024-5-25

Top 8 Crypto Trading Mistakes to Avoid in Malaysia

The world of cryptocurrency trading offers immense opportunities for profit, but it also comes with its fair share of risks. To succeed in this volatile market, it's essential to avoid common crypto trading mistakes that can undermine your efforts. Here we will discuss the top 8 crypto trading mistakes you must avoid to enhance your chances of success.

Table of Contents

  • Not Understanding Market Trends and Analysis in Crypto Trading
  • Over / Under Investing Crypto
  • Not Managing Proper Asset Allocation in Crypto Trading
  • Over Diversifying Your Crypto Portfolio
  • Crypto Portfolio Not Adapting to the Market
  • Not Preparing Emergency Funds in Crypto Trading
  • Not Using Fear and Greed Index in Crypto Trading
  • Not Choosing a Right Broker in Crypto Trading
  • The Bottom Line
  • Frequently Asked Questions

1) Not Understanding Market Trends and Analysis in Crypto Trading

In the world of cryptocurrency trading, understanding market trends and analysis is crucial for making informed decisions. It is essential to stay updated with the latest market trends, news, and developments in the crypto space. This can be achieved by following reputable sources, such as financial news websites, crypto-specific publications, and social media channels dedicated to cryptocurrency trading.

Utilising both technical and fundamental analysis is essential for successful cryptocurrency trading. Technical analysis involves studying historical price movements and volume data to identify patterns and trends, while fundamental analysis focuses on evaluating the underlying factors that may influence the value of a cryptocurrency, such as its industry, technology and market potential.

One common mistake to avoid in cryptocurrency trading is solely relying on speculation and rumours. While market sentiment and rumours may have some impact on prices, basing trading decisions solely on these factors can be risky and lead to losses. It is more advisable to make decisions based on valid sources that can be trusted in order to succeed.

Understanding Market Trends and Analysis in Crypto Trading

2) Over / Under Investing Crypto

Investing in cryptocurrency is a thrilling decision, offering the potential for substantial returns but also fraught with risks. Among the most common pitfalls that traders encounter is the tendency to either over or under invest. Both scenarios come with their own set of challenges and can significantly impact your overall trading strategy and financial well-being.

One of the traps many newcomers fall into is over investing in cryptocurrency. The allure of quick profits and the fear of missing out (FOMO) often lead traders to pour in more money than they can afford to lose. During bull markets, this can be especially tempting, as soaring prices and hype fuel a sense of urgency to invest more. However, over investing comes with its risks. When the market inevitably experiences corrections or downturns, those who have overextended themselves may face substantial losses. Suddenly, what seemed like a promising investment turns into a financial burden, potentially leading to panic selling or further losses.

Conversely, under-investing in cryptocurrency can also hinder investors from maximising their potential gains. This cautious approach may stem from fear of volatility, scepticism about the long-term viability of crypto assets, or a lack of understanding of the market. While under investing minimises the risk of significant losses, it also limits the opportunity to capitalise on the potential growth of crypto assets.

For instance, imagine an investor who allocates only a small fraction of their portfolio to cryptocurrencies due to apprehension about the market's unpredictability. While this conservative approach may provide peace of mind in the short term, it may result in missed opportunities for substantial returns over time. Cryptocurrency markets have demonstrated the potential for exponential growth, and those who under-invest may forgo the chance to participate in this lucrative asset class.

Another factor to consider when to take risks by investing more in crypto is the age factor. It's recommended to take risks at a younger age compared to older age because of the longer recovery period from any potential loss in crypto trading. On the other hand, investing in crypto at a younger age can benefit from the compounding effect of long-term investment growth. As a result, younger investors may feel more comfortable taking on higher levels of risk in pursuit of potentially higher returns. It is advisable to take risks depending on individuals' financial situation where any potential losses invested in crypto will not affect daily lives.

Over investing in crypto can expose you to significant losses if the market takes a downturn, while under investing may limit your potential gains. It's crucial to strike a balance and invest an amount that you can afford to lose while still maximising your potential returns. Finding the right balance will help you manage risk and optimise your profits in the crypto market. Understanding the importance of proper investment allocation is key to avoiding this common pitfall in cryptocurrency trading.

3) Not Managing Proper Asset Allocation in Crypto Trading

One important critical consideration in crypto trading is about understanding the end goal of the investment. Whether it is preserving your wealth and combating inflation or growing your wealth to gain higher profit from the compounding effect.

Managing Proper Asset Allocation in Crypto Trading

Taking the portfolio investment above, it can be seen that there is higher allocation to high volatility assets such as cryptocurrency. This portfolio focuses on wealth growth as compared to conservative approaches to preserving wealth. While allocating assets to crypto can be risky, the reward can be promising as well.

Identify your end goal for the Crypto Investment

On the other hand, the portfolio investment above suggests preserving the wealth more as compared to growing the wealth as it has lesser crypto allocation. Instead, more funds are allocated to stocks, ETF and gold for long-term investment with the end goal of combating inflation for preserving wealth.

In summary, it is essential to identify your end goal for the investment so that the resources are allocated into the required assets class. Depending on your end goal, investing more in crypto can lead to faster growth in building wealth with higher risks involved, while investing less in crypto is a safer investment approach. 

4) Over-Diversifying Your Crypto Portfolio

Creating a diverse portfolio is a fundamental strategy in trading and investment. However, over-diversifying your crypto portfolio is another common mistake that crypto traders make. While diversification is important for managing risk, spreading your investments too thin across too many cryptocurrencies can dilute your potential gains. It's crucial to carefully select a few promising cryptocurrencies and focus on them, rather than trying to invest in every new coin that comes along, especially if you did not do enough research about the coins.

By avoiding over-diversification, you can concentrate your resources and make more informed decisions about the assets in your portfolio management. First, identify your own niche that you have researched. Then, try to select your winners in that niche and devote more funding to them. This approach will help you avoid the mistake of spreading yourself too thin and increase your chances of success in the crypto market. Some popular sectors in the crypto industry now include DeFi, NFT, Video Games, etc.

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How to Create a Diverse Portfolio: A Guide to Investment Success

Over-Diversifying Your Crypto Portfolio

5) Crypto Portfolio Not Adapting to the Market

Adapting your crypto portfolio management to the market is essential for long-term success. Many traders make the mistake of holding onto assets that are no longer performing well due to market changes. However, it's crucial to regularly assess your portfolio and make adjustments based on market trends and performance. Taking a proactive approach to manage your portfolio will help you capitalise on opportunities and minimise losses, ultimately leading to a more successful crypto trading experience. By avoiding the mistake of being too passive with your portfolio, you can stay ahead of market changes and make strategic decisions to enhance your profitability.

To put it simply, your portfolio can be aggressive during a bull market. In contrast, your portfolio should be conservative during a bear market. As an example, an aggressive portfolio can include more low-cap and mid-cap altcoins while conservative portfolio can contain more stable coins such as Bitcoin. By capitalising on these market opportunities, you can grow faster and take advantage of the market conditions to position your portfolio for success.

6) Not Preparing Emergency Funds in Crypto Trading

 Not having emergency funds set aside is a critical mistake that many crypto traders make. In the volatile world of cryptocurrency, unexpected market fluctuations or unforeseen circumstances can lead to sudden losses. Having emergency funds can provide a safety net and help you weather any unexpected challenges without having to liquidate your entire portfolio. By avoiding the mistake of not having emergency funds, you can protect your investments and maintain financial stability during turbulent times in the crypto market. It's essential to prioritise building an emergency fund as part of your overall risk management strategy in crypto trading.

The cryptocurrency market is notorious for its high volatility and inherent unpredictability. Prices of digital assets can experience rapid and significant fluctuations within a short period, driven by various factors such as market sentiment, regulatory developments, technological advancements, and macroeconomic trends. Moreover, unforeseen events such as security breaches, exchange hacks, or sudden regulatory changes can have a profound impact on asset prices and investor sentiment.

In such a volatile environment, having emergency funds serves as a crucial safety net for traders. Emergency funds are liquid assets set aside specifically to cover unexpected expenses or financial setbacks. These funds provide traders with a buffer against unforeseen challenges without the need to liquidate their entire investment portfolio, which could result in losses or missed opportunities.

Building emergency funds should be a top priority for every crypto trader. While the specific amount of emergency funds may vary depending on individual circumstances, it is generally recommended to set aside three to six months' worth of living expenses in a liquid and easily accessible account.

7) Not Using Fear and Greed Index in Crypto Trading

The impact of emotions on trading decisions cannot be overstated. Fear and greed are common emotions that can lead to impulsive and irrational trading decisions. Recognizing the influence of emotions and developing a disciplined approach to trading are essential for long-term success in crypto trading.

Avoiding the mistake of making impulsive decisions based on fear or greed is critical. This can be achieved by setting clear trading rules, sticking to a predetermined trading plan, and maintaining a rational mindset even during periods of market volatility. Besides these strategies, traders can also leverage tools such as the Fear and Greed Index to gauge market sentiment and sentiment extremes. The Fear and Greed Index tracks investor sentiment by analysing various market indicators and provides a numerical score indicating whether investors are driven by fear or greed.

By monitoring the Fear and Greed Index, traders can gain insights into market sentiment trends and potential shifts in investor psychology. This information can inform trading decisions and help traders navigate market extremes more effectively.

Fear and Greed Index in Crypto Trading

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Decode Crypto Sentiments: Fear and Greed Index Explained

8) Not Choosing a Right Broker in Crypto Trading

In the world of cryptocurrency trading, selecting the right broker can make all the difference between success and failure. However, many traders overlook the importance of this decision, leading to potential consequences that can negatively impact their trading experience and financial outcomes.

Why Choosing the Right Broker Matters

  1. Security and Reliability: The cryptocurrency market operates 24/7, making it susceptible to security threats and technical issues. Choosing a reputable broker with robust security measures and a reliable trading platform is essential to safeguard your funds and ensure smooth trading experiences.
  2. Range of Assets: Different brokers offer varying selections of cryptocurrencies for trading. By choosing the right broker, traders can access a diverse range of assets, allowing for greater flexibility and opportunities to capitalise on market trends.
  3. Trading Fees and Commissions: Brokerage fees and commissions can significantly impact trading profitability. Opting for a broker with competitive fee structures and transparent pricing can help traders minimise trading costs and maximise returns.
  4. Customer Support: In the fast-paced world of crypto trading, having access to responsive and knowledgeable customer support is crucial. A reputable broker will offer excellent customer service, assisting traders with inquiries, technical issues, and account management.

There are many cryptocurrency brokers available for you, but few are as easy and secure to use as FXCM Markets. Sign up for demo account now in FXCM markets for free to start your journey in crypto trading.

The Bottom Line

In conclusion, the top 8 crypto trading mistakes discussed in this article shed light on the critical errors that traders must steer clear of to enhance their chances of profitability and mitigate risks.

By prioritising the establishment of emergency funds, avoiding impulsive trading decisions driven by fear or greed, and selecting the right broker, crypto traders can build a solid foundation to achieve financial goals in the volatile and rapidly evolving cryptocurrency market. It is important for traders to approach their investment and trading activities with discipline, strategic planning, and a clear understanding of market dynamics.

While the crypto market presents lucrative opportunities, it also carries inherent risks, making it crucial for traders to educate themselves, stay informed, and make wise decisions based on thorough analysis and risk management.

For more crypto tips, check out the FXCM market insights.


Q: What are the best sources for staying updated with crypto market trends and analysis?

A: Reputable financial news websites, crypto-specific publications, and dedicated social media channels are excellent sources for staying informed about the latest market trends and developments in the crypto space. Additionally, subscribing to newsletters and joining online communities can provide valuable insights from experts and fellow traders.

Q: How can I determine the right balance for investing in crypto assets?

A: Finding the right balance for investing in crypto assets involves assessing your risk tolerance, investment goals, and financial situation. It's essential to invest an amount that you can afford to lose while still maximising potential returns. Consulting with financial advisors or utilising risk assessment tools can help you determine the optimal investment allocation for your portfolio.

Q: What factors should I consider when selecting a cryptocurrency broker?

A: When choosing a cryptocurrency broker, consider factors such as security measures, reliability of the trading platform, range of available assets, trading fees and commissions, and quality of customer support. Opting for a reputable broker with robust security features, competitive pricing, and responsive customer service can enhance your trading experience and safeguard your investments.

Q: Why is it important to monitor the Fear and Greed Index in crypto trading?

A: The Fear and Greed Index provides valuable insights into market sentiment trends and potential shifts in investor psychology. By monitoring the index, traders can gauge the level of fear or greed prevailing in the market and make informed trading decisions accordingly. This helps traders navigate market extremes and avoid making impulsive decisions driven by emotions.

[Disclaimer] The articles above are purely personal opinions and are not intended to be investment advice. Only for the purpose of mutual learning and sharing. There is no express or implied warranty regarding the accuracy or completeness of the above-mentioned information. Anyone who relies on the information, ideas, or data contained in this article does so entirely at their own risk.