Trading crypto perpetual (perps) gives access to 24/7 crypto trading with high leverage and high risks. Beginners make mistakes because of lack of a trading strategy, impulsive behavior, and misunderstanding the market.
- 1. Overleveraging Without Understanding
- 2. Neglecting Risk Management
- 3. FOMO (Fear of Missing Out)
- 4. Ignoring Funding Rates
- 5. Having No Trading Plan
- 6. Not Anticipating Market Volatility
- 7. Feel the pressure to Trade
- 8. Ignoring Liquidation Risk
- 10. Neglecting Continuous Learning
- Why is Overtrading a Mistake?
- Conclusion
- FAQ
If you want to build confidence while trading crypto, the first step is to identify and understand the market mistakes. Here is a list of ten mistakes every beginner needs to keep in mind.
1. Overleveraging Without Understanding
A new trader is certainly going to get attracted to the high trading leverage. Some crypto exchanges even offer 50x leverage.
High leverage can give high profits but can also give high losses leading to liquidation. Beginners can also not understand the risks of a sudden and rapid position reversal in the market.
It is advisable to place low trades ($1-$5) a spread of 2x to 5x leverage and 1-2% of your total trading capital on the account.
New traders get the discipline to manage their leverage in a safe and rational way from the demo accounts.
2. Neglecting Risk Management
It’s easy to overlook risk management, particularly for newer traders. Losing position size, setting no stop-losses, and having no exit plan means runaway losses.
Perpetual contracts can get extremely volatile, so this is particularly important. Proper risk management protects your capital and keeps you from emotional, desperate trading.
Beginners should always calculate risk-to-reward ratios for each trade, and only lose a set percentage of their account balance to stay rollover safe.
Always having a stop-loss and a take-profit in place on every trade allows for a systematic discipline, so that if a trade goes against you, it won’t wipe your whole account out.
3. FOMO (Fear of Missing Out)
FOMO is one of the most common fears that traders deal with, especially new traders. Traders often try to take a position after a price spike, thinking that the price will spike even more. Since exchanges can take market orders instantly, it encourages this kind of behavior.
From my experience and research, this behavior often results in poor entry and, the more you try to take a profit, the more you lose.
You can avoid FOMO by waiting for a price retracement, confirming the price spike with a trend indicator, and following your price action trading plan. Market orders can lead to poor entry and, often, emotional entry driven by fear or greed.
4. Ignoring Funding Rates
Perpetual contracts include funding fees, which are designed to temporarily align the spot contract and the underlying asset’s price.
Many newcomers to the market overlook these fees, which are charged every few hours, and find that their profits have evaporated or that they are incurring losses.
Depending on the market bias, funding rates can be positive or negative, and they are displayed on the trading interface.
Before opening positions, whether long or short, it is critical that funding rates be checked and incorporated into the trading plan.
Once a trader understands this market feature, they can strategically enter positions to fund the costs over time, thereby maximizing their profitability.
5. Having No Trading Plan
Not having a trading strategy, particularly when starting out, is most common. Trading tools, including charts, technical indicators, and order types available on an exchange, can only help if they are integrated into a trading strategy.
Trading strategies provide predictability, structure, and help to minimize impulsive actions driven by emotion.
Players without a strategy are essentially gambling and are more likely to experience substantial and repeat losses.
Such losses can be avoided by having a clearly documented trading plan, which outlines the trading strategy and includes backtested criteria for entry, exit, and stop-loss points. This approach promotes rational trading, thereby delivering more constructive results over time.
6. Not Anticipating Market Volatility
It is quite common to witness extreme volatility on crypto perps, with prices varying by 5 to 10% within a few minutes. This extreme volatility is mostly unaccounted for by beginners, who open large and naked positions.
While increased volatility provides for potential profit, it does come with the potential for significant and rapid losses.
A much better strategy is to open smaller positions, use moderate leverage, and monitor the news and overall market sentiment.
Volatility scalping and stop-loss orders to mitigate losses are both useful. Market sentiment must be respected to remain in perpetual trading.
7. Feel the pressure to Trade
Traders are bombarded with trade prompts to the extent where they don’t exercise cognitive control, resulting in high activity within their account and lower account performance.
This behavior is mostly fueled by the use of cross and isolated margin trading. Excessive trading unnaturally inflates trading fees, compounding trade friction through the rent and sleep function.
Cutting down on trades to a few high probable scenarios reduces unnecessary targeting and increases cognitive control. A winning trading strategy provides documented the potential trades to maintain a profit-to-loss ratio, overall reducing the psychological strain.
It is best for beginners to reduce the number of trades while they learn to control their account. The best method to reduce the cognitive strain and learn is to trade profitably.
8. Ignoring Liquidation Risk
Liquidation is a risk that every trader must understand. New traders tend to overlook maintenance margins or forget to calculate liquidation prices and end up putting their entire account at risk. Warnings from exchanges are mostly ignored.
Attention to liquidation is critical in protecting capital and avoiding forced losses. To efficiently avoid liquidation, liquidations prices should be calculated prior to entering a trade, extra margins should be kept, and over-leverage should be avoided.
Understanding how much the market can move against you is crucial to making safe trading decisions and keeping funds available for future opportunities.
9. Blindly Following Social Signals
Signals from influencers, Telegram groups, or Twitter can be problematic as they do not account for personal risk tolerance, sequencing, or the overall market situation.
Copying trades mindlessly can lead to losses. One way to avoid losses is to understand the concepts of technical and fundamental analysis, independent verification of trade, and personal trading plan execution.
There is a sense of self-empowerment and confidence that comes from using the self-analysis tools provided by exchanges. Independent judgment and self-education in trading will always be more beneficial than simple imitation.
10. Neglecting Continuous Learning
The crypto markets are constantly changing and newbies often stop learning after only a few trades and stick with an outdated strategy.
Continuous learning not only increases your flexibility but also improves your decision-making. The best way to stay current is by following market news, analyzing price charts, and backtesting your strategies.
Practice makes perfect, so use demo accounts. Keeping yourself updated is the best way to ensure that your methods will be relevant and profitable.
Learning crypto perpetuals will help you translating mistakes into lessons and will help you develop a mindset to thrive in highly unpredictable market situations.
Why is Overtrading a Mistake?
Chasing every price shift and constantly adjusting trading positions can lead to skewed calculations for new crypto perps traders.
In-and-out positions compound to missing stop-loss levels and facing burnout and emotional fatigue. Reckless mistakes surge from excessive frequency.
Careful frequency allows proper risk calculation and improves discipline. Excellent position setups require deep and rational risk analysis
All rationalizing toward appropriate trade levels, then lead to deep focus, calm decision-making, and contrast sharply with imprecision. Alignment favors consistency and potential for profit over time.
Conclusion
Perpetual crypto trading is highly profitable, but a few mistakes, such as overleveraging, forgoing risk management, FOMO, and ignoring funding rates, can wipe your account in a matter of minutes.
Having knowledge of these mistakes and practical ways on how to avoid them will help beginners be smarter in their trading, defend their capital, and reach their target in a more consistent way over time.
The crypto perpetuals market is volatile and unpredictable so the most important thing is to keep learning.
FAQ
Overleveraging is using excessive leverage to increase profits. While it can amplify gains, it also increases the risk of rapid liquidation.
Risk management protects your capital. Using stop-losses, position sizing, and risk-to-reward ratios prevents large losses in volatile markets.
Funding rates are fees paid between long and short positions to keep contract prices near spot prices. Ignoring them can reduce profits.
Liquidation risk occurs when your margin falls below maintenance levels. Ignoring it can wipe out your account quickly.
Yes. Blindly copying others ignores personal risk and market context, often leading to losses.
