Tips for Cryptocurrency Trading. These are some useful tips to guide your trading in a time when the market seems to be bullish
1. Have a motive for entering each trade
Now, I know this may sound obvious but it’s important for you to have a clear purpose for getting into cryptocurrency trade. Whether your purpose is to day trade or to scalp, you need to have a purpose for starting to trade cryptos. Trading digital currencies is a zero-sum game; you need to realize that for every win, there is a corresponding loss:. Someone wins; someone else loses.
The cryptocurrency market is controlled by the large ‘whales’, pretty much like the ones that place thousands of Bitcoins in the market order books. And can you guess what these whales do best? They have patience; they wait for innocent traders like you and me to make a single mistake that lands our money to their hands due to avoidable mistakes.
Whether you are a day trader or scalper, sometimes you’re better off not gaining anything on a certain trade than rushing your way into losses. From our years of market analysis, we can comfortably tell you that on certain day or periods, you can only stay profitable by keeping off some trades.
2. Set profit targets and make use of stop losses
Every trade we get into requires us to know when to get out, whether we’re making a bitcoin profit or not. Establishing a clear stop loss level can help you cut your losses; a skill that’s very rare in most traders.
Choosing a stop loss is not a random activity, and perhaps the most important thing to note here is that you shouldn’t be carried away by your emotions – a great point to set your stop loss is at the cost of your coin. If, for instance, you acquired a coin at $1,000, set that as the minimum point you’re willing to trade your coin. This will ensure that if the worst comes to pass, you can walk away with what you invested in the first place.
The same applies to profit levels if you target to get out of the market after hitting a certain minimum profit; stick to that. Don’t be greedy; it’s never a nice color on anyone!
3. Welcome to FOMO!
FOMO is an abbreviation for the fear of missing out. This is one of the most notorious reasons as to why many traders fail in the art. From an outside point of view, it is never a good scene seeing people make massive profits within minutes from pumped-up coins. Honestly, I never like such situations any more than you do.
But I’ll tell you one thing that’s for sure…
Beware of that moment when the green candles seem to be screaming at you and telling to you to jump in. It is at this point that the whales I mentioned earlier will be smiling and watching you buy the coins they bought earlier at very low prices. Guess what normally follows? These coins usually end up in the hands of small traders and the next thing that happens is for the red candles to start popping up due to an oversupply and, voila, losses start trickling in.
4. Manage Your Risks
Little pigs eat a lot, but big ones get eaten. This is especially true of market profits when trading cryptocurrencies. Wise traders never run in the direction of massive profits; nope, they don’t!
Consider investing less of your portfolio in a market that is less liquid. Such high trades require more tolerance, while the stop loss and profit target points will be allocated further from the buying level.
5. Underlying Assets Create Volatile Market Conditions
he prices of most altcoins depend on the current market price of Bitcoin. It is vital to understand that Bitcoin is relative to fiat currencies and is quite volatile.
The simpler version of this is that when the value of Bitcoin goes up, the value of altcoins goes down and vice versa.
The market is normally foggy when the Bitcoin price is volatile and, as you would imagine, this prevents most traders from gaining a clear understanding of what goes on in the market. At this point, it is advisable to either have close targets for our trades or simply not trade at all.
6. Don’t Buy Simply Because the Price is Low
Most beginners make one common mistake: buying a coin because it’s price seems to be low or what they consider affordable. Take, for example, someone who goes for Ripple instead of Ethereum simply because the latter is much cheaper.
The decision to invest in a coin should have very little to do with its affordability but a lot to do with its market cap.
Just like the conventional stocks are gauged by their market caps, which is evaluated using the formula Current Market Price X Total Number of Outstanding Shares, the same applies to cryptocurrencies.
There is no difference between having a coin priced at $10 per coin with a total number of 1 million shares in the market and the same coin being priced at $100 with 100,000 shares in the market. For this reason, it is more justifiable to use a coin’s market cap to decide whether or not to invest in it than using its price. The higher a coin’s market cap, the more suitable it is for investment.
7. A Tip About Crowd-Sales/ICOs
During an ICO (Initial Coin Offering), startups offer the general public an early chance to invest in their idea through a crowded sale. In return, these investors are allocated tokens at a lower price with a promise to sell them at a much higher price when listed on an exchange.
Time has proven that ICOs can quite successful with records showing that some tokens ended up more than ten times the value of the projected returns.
But what’s the catch in this, you might ask…
ICOs have attracted a large number of investors clearly due to their high returns; however, another large number of ICOs have turned out to be total scams. People have lost millions worth of investments.
There’s a need for one to be more than cautious when looking to invest in any ICO. Knowing when to or not to invest in an ICO is not about science; rather, it’s about paying close attention to those details that most people seem to overlook while only focusing on the promised returns.
Conduct a background check on the team behind the project and analyze their ability to deliver on their promise. In addition, you should also look at the viability of the idea behind the ICO, poke holes in the project’s white paper and seek answers where necessary.
That will ensure that no stone is left unturned and, if by the end of it you still have doubts about the project, you’re better of passing than chance it investing in that ICO.
8. A Quick One for Altcoin Investors
A lot of Altcoins end up losing value over a certain period of time, sometimes in an unusually short period of time. It is, therefore, paramount to understand that whenever you hold an altcoin for the long term, be careful not to hold on to them for too long.
One of the best measures of coins that are perfect for long-term investments is the daily trading volumes. The higher the daily trading volume, the more suitable an asset is for long-term investments.
If you’re thinking of going long term with cryptocurrencies, consider investing in some of the following coins: Ethereum (ETH), Factor (FCT), Monero (XRM), and Dash. These have decent trading volumes on various exchanges around the world.
Be sure to also observe the charts of these coins and take note of the various price spikes – the patterns can help you know the periods are to sell or buy a coin.
9. Diversify, Diversify, and Diversify!
Investments are unpredictable; even those that seem to offer infinite positive returns can come crumbling down under certain economic condition. Cryptocurrencies are even more unpredictable.
As much as you can reap profits in thousands in a day or less, the opposite is also true. You can lose everything you invest in digital assets in a flash of a second. So, the best way to get past such uncertainties is through diversification.
Like I mentioned earlier, the value of all other coins is affected by the value of Bitcoin against the USD. When BTC loses value against the dollar, all other coins lose value and vice versa. From that, you can clearly see that diversifying your portfolio among various coins may not be enough to cushion you against bullish markets.
Do you remember when Bitcoin was at its all-time high in late 2017/early 2018? Everyone knew the way to go was to buy as many digital currencies as possible to gain more value over the dollar.
But having a volatile base asset like Bitcoin comes with its challenges as you may have noticed in the second half of 2018. Bitcoin made a lot of people rich in the shortest time than in the history of any known investment. The truth is, billionaires were made; and what most people never seem to understand is that a lot of people also lost money.
And in the midst of all this, the currency managed to grow its market cap by over thirty times more in the past year alone.
This means that it is okay for traders to keep Bitcoin as their base asset, but they also need to realize the value of the dollar cannot be overlooked. You need to diversify away from the same type of asset to different areas so as to spread your risk.
There are other equally viable investments that are not as risky as compared to cryptos; these include real estate, mutual funds, stocks, and more.
#10. Super Tip!
This final tip will offer you practical steps to start implementing immediately in your trading.
Make use of the goal setting feature by placing sell orders: Make sure that you set your revenue targets by placing sell orders in the order books. You never know when your order price will be met, earning you exactly what you needed. Besides, sell orders attract fewer transaction fees since they are the market “makers”.
Take it easy while trading: They say the best traders mastered the art of maintaining their cool even when things seem to be out of hand. Yup, I know how insane that sounds but you’ve got to develop the skill of not trading emotionally, but objectively.
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