Cryptocurrency trading is a lucrative financial asset, and for you to succeed, you ought to go about the trade wisely, and it begins with learning how to trade and how the market operates.
You need to understand that the market has in-depth loopholes that could cost you your investments if you don’t understand the market and how it operates.
If you are feeling overwhelmed by the complexities of the crypto market, I recommend the Bitcoin Profit platform; It just requires little time to set your trading parameters and the software begins to trade for you. It’s that simple.
Without further ado, here are the 7 amazing tips for trading cryptocurrency.
1. Start out Small
The first of our bitcoin trading tips is to start with a relatively small investment. Cryptocurrencies are extremely volatile and the risk involved is huge. Avoid the temptation to put all your eggs in one basket; instead, opt for small-stake trades that allow you to get a handle on the market with minimal risk.
Of course, the best of all trading tips is to never trade with more than you can afford to lose as said in bitcoin profit review.
2. Choose a Secure Wallet
The crypto wallet is a secure home for your digital assets, so it’s important to choose wisely to ensure security and ease of access. There are multiple options out there, all with their own features and functionality.
Although, it’s advisable for beginners to trade through a reputable broker, such *as Coinbase, and use the wallet they provide.
If you’re looking to choose your own wallet still, then, you’ll need to decide which type works for you.
Wallets are characterized as either hot or cold:
- Hot wallets are connected to the internet and subsequently open to hackers
- Cold wallets store your assets offline and are generally considered more secure
A hot wallet should suffice if you require instant access; so long as you double-check the reputation of the provider.
It’s best though to opt for a cold wallet if you’re in possession of high valued cryptocurrencies.
3. Research the Market
The only way to become a competent crypto trader is to research and study the market.
That said, there are steps you can take to broaden your understanding.
Technical analysis is a key research skill that requires the time to practice reading charts and identifying patterns to inform your trading strategies.
You should also be wary of trading tips from other traders. The nature of the market means many people are waiting to profit from the unskilled. These same people are all too happy to tell you the ‘right time to buy’ in the hope of pumping value so they can exit on a big win. Never take advice on face value and do your due diligence before entering a trade
4. Decide on a Trading Strategy
Before you even think about opening a position, you should put careful thought into the type of trader you want to be. This will depend largely on the amount of time you have to commit to trading activity and market analysis, and how quickly you’re looking to turn a profit.
Cryptocurrency traders fall into one of four categories:
- Scalpers are the most active, making multiple trades per day for small profits.
- Day traders enter and exit the market within 24 hours, taking advantage of short term market movements.
- Swing trading is based on in-depth technical analysis to capture trends in the market.
- passive trading requires that you hold on to your positions with a focus on long term profit.
5. Be Strict with Profit Targets and Stop-Loss Orders
Crypto is unpredictably volatile, more so than any other financial market, so it is vital to have a plan and stick to it.
Before opening a position, consider what level of profit you would be happy to take from the trade, what losses you can afford to shoulder, and set your target and stop-loss levels right from the onset.
This is one of the most important tips, as without a disciplined approach it’s all too easy to expose yourself to potentially devastating losses.
New traders fall victim to greed, holding on to a position for further profit only to see prices plummet, whilst others optimistically convince themselves that a downward trend will reverse as they fall deeper into the loss zone.
By being strict with your profit targets and stop-loss orders, you can easily avoid this pitfall and minimise risk.
6. Diversify with different Cryptocurrencies
The most important crypto trading tips are those that focus on mitigating risk, and diversifying your portfolio is sure to mitigate risk.
Too many first-time traders develop an obsession with just one potential investment and fail to address its downfalls.
By trading in other cryptocurrencies, you hedge your investments. If one falls in value, your loss may be compensated from profit on another.
Diversification can also boost your profits in good market conditions. If you have invested wisely, you could well find yourself holding multiple assets of high value.
It is crucial not to over dilute your portfolio. You still need to assign a worthwhile amount of capital to each trade. Find a balance that reasonably increases your profit potential whilst simultaneously minimising your exposure in any one cryptocurrency
7. Get a Handle on Your Emotions
There are emotional factors that you need to be aware of, most notably, the fear of missing out (FOMO).
Due to extreme volatility of the crypto market, it is not unusual to see dramatic price spikes in a very short space of time and it can be tempting to buy-in to an upward trend, worrying you will miss out on major profit if you don’t.
Nevertheless, this goes against the most basic rule of trading – buy low, sell high.
Falling victim to FOMO is one of the main reasons so many First time traders fail. Be wary and accept that some profitable opportunities just are not meant for you.
Whatever type of crypto trading strategy you plan on using, you must place security and risk-management measures as its priority.
You should use these cryptocurrency trading tips alongside other trusted resources to ensure you have a good grasp of the market and its pitfalls, understand how to perform technical analysis and how to compile a detailed risk-management plan to give yourself the best chance of becoming a successful cryptocurrency trader.