The meteoric rise of Bitcoin between 2009 and today is truly astounding. Worth around a dollar ten years ago, the price of Bitcoin is hovering around $50,000 today. Considering that, it’s no wonder that so many people are interested in other cryptocurrencies, hoping to take the same kind of ride.
Are you interested in crypto trading? If so, who could blame you? That being said, you’ll want to do some research and homework before throwing your hat in the ring.
Tips for crypto trading tend to be similar to the advice you’ll hear if you’re trading in the traditional stock market. However, because the world of cryptocurrency is much younger and potentially more volatile, it’s important to not simply apply the exact same analysis to crypto as you would to mega-caps like Apple ($AAPL).
Without further ado, let’s jump into ten crypto trading tips to help you grow your money and not lose it.
1. Make Use of Stop Losses and Set Profit Targets
Honestly, it doesn’t matter whether you’re trading cryptocurrency, securities on the stock market, or options trading: you’ll want to learn about stop losses and how to use them right away. Entering a trade is a major decision, but so is how you exit. If you don’t have a plan beforehand, there’s a good chance that you will make the wrong decision in the heat of the moment.
It is hard to understand the psychology of trading until you actually experience it for yourself. The levelheaded, quick-on-your feet person you know you are won’t be anywhere around once you have entered a trade unless you have a plan ahead of time. This is particularly true when you’re just starting out.
For this reason, you always want to have a sense of your profit target and also a strict stop loss. Experienced traders might be able to “feel” out the market to some extent, but as a brand-new trader, you simply will not be able to. Having a profit target will ensure that you take money off the table before it disappears and having a stop loss is your best friend when it comes to managing losses.
2. Beware of FOMO, Your New Enemy
If you have never heard of FOMO, which is an abbreviation for the “fear of missing out,” you are going to know it intimately soon. This is one of the most common reasons that new traders and that failing.
When you are starting out on your crypto trading platform, it’s easy to watch the momentum of the green candles and feel like you’ve got to hop on the train to tendie-town. However, while you might get lucky sometimes, it’s never a good idea to chase a movement that has already occurred.
Trading is something that you should plan out ahead of time. Every single trade that you make should have been considered at great length before you press the button.
If it looks like something exciting is going on in your missing out, teach yourself to hold off and recognize that you are already too late. Use this as an opportunity to try and learn how you could have anticipated the movement and gotten in earlier.
3. Choose a Trading Strategy
There are a number of different trading strategies and it’s important that you decide on your own style before you get started. A part of what will determine the best choice is how much time you are willing or able to commit to market analysis and trading activity. It will also depend on how quickly you’re looking to turn a profit and how much risk you’re willing to take on.
There are four different categories of crypto traders:
- Scalpers will make multiple trades per day in which they are in and out of the trade incredibly quickly
- Day traders take advantage of short-term moves in the market and always enter and exit their positions within the same trading day
- Swing traders hold positions for anywhere between a few days to several weeks and usually primarily use technical analysis to find their trading opportunities
- Passive traders are long-term investors who buy their position and hold years at the time
You will need to decide what your strategy and style are ahead of time. If you go and without a strategy, you likely will not manage your crypto current trading nearly as well as you would hope.
4. Start Out Small
This is a simple tip for crypto trading, but it might be the most important. If you did you get carried away imagine yourself turning your life savings into enough to live on for the rest of your life. However, it’s important to understand that you can also wipe out your savings more quickly than you’d like to think.
One of the first rules of trading of any kind is that you should never risk more than you are willing to lose. The money that you use should never be the money that you need to pay for your basic needs for those of your family. If you don’t have any money that you are willing to lose at this point, work to save up an initial investment amount so that you can get practice without destroying your bank account.
5. Choose a Secure Wallet
You will need a software application called a “wallet” where you store your crypto. You’ll want to do some research and find a reputable wallet where you can feel secure storing your coin.
One of the most common crypto wallets is Coinbase, but there are a number of other options.
Looking for a place to trade crypto? Check out this crypto trading platform.
6. Research the Market
When you start cryptocurrency trading, you are taking on a project. You will need to do your homework first and get to know the market as well as possible before you begin. There is no one specific way to “learn the market,” particularly because the world of cryptocurrency is so young compared to the stock market.
Learn about technical analysis, which is the science and art of reading charts and learning to identify patterns that can inform your trading decisions. When you are starting out, you also want to be wary of trading tips you receive from other crypto traders. People might be hoping to pump the value since they already have a position in order to take the win for themselves.
For this reason, you should always do your due diligence before you decide to enter a cryptocurrency trade.
7. Be Extremely Cautious When Using Leverage
When you trade on margin, you are able to hold a much larger position in crypto than the actual amount of money that you have in your account. This can be appealing to new traders, as it can allow them to make more profit when they take when. However, if a trade you take on margin turns against you, you can experience huge losses.
8. Diversify Your Portfolio
If you are planning on being a long-term investor, you will want to diversify your wallet. There is a lot of “meme-ry” that happens around various cryptocurrencies, and it’s easy to get swept away thinking that if you put all your money in one crypto you could become a millionaire. While it certainly happened for some people, it’s typically not a good idea to put all your eggs in one basket.
9. Be Aware of How Big of a Deal Trading Psychology Is
While we’ve already talked about FOMO, that isn’t the only emotional downfall you’ll need to watch out for. Trading psychology is a huge deal, and it’s amazing how your emotions can start to get the better of you.
Greed and fear can drive people to make poor decisions. People can get locked in a cycle of “revenge trading” where they feel that they are owed money that was taken from them and enter and exit trades over and over again in a way that can result in some serious losses.
10. Keep an Eye Out For Scams
Lastly, but perhaps most importantly, always keep an eye out for scammers. In any corner of the Internet where there is money to be made, there are likely to be people that are trying to take advantage of you.
Watch out for fake exchanges and wallets, phishing scams, Ponzi schemes, and malware.
Crypto Trading: Is Now the Time For You?
It can be so tempting to throw your money into crypto that you hear someone say is a “sure bet.” However, it’s a much better idea to enter crypto trading in a thoughtful and patient way.
Remember, crypto will still be there tomorrow, so you don’t need to rush into it before you’ve had time to do your homework. Trust us, you’ll be glad you did.
Did you find this article on crypto trading interesting? If so, be sure to check out the rest of our blog for more fascinating and informative content!