Cryptocurrency have been a hot topic for many for quite some time now. However, not many fully understand the concept and it can be overwhelming if you are not familiar with the market yet. Like any other investment, it is best for you to first dip your toes into the crypto pool before you go deeper.
Here are some golden rules that can help traders in trading cryptocurrency successfully:
1. Invest in what you understand
It’s a very important factor that always buy what you understand, as before investing or trading in cryptocurrencies, we have to understand about the project, about its technology, about its usecase in future, how good is their team, how they talk with the community members, so we have to understand these things before going in any investments and for day traders we have to understand the chart, its orderbook, whale manipulation so that we can easily do a successful trade.
2. There is no win-win situation in crypto trading
Crypto trading is like a game of balance. Sometimes nothing happens and the courses are very balanced in the middle. But every time a trader makes a profit, another suffers a loss.
3. Only invest what you can afford to lose
Many investors take loans to invest in a cryptocurrency which might be beneficial for few, but not for everyone. Crypto market is highly volatile, and it can anytime turn you from zero to hero and vice-versa. Also, the decentralization of cryptocurrency is susceptible to many factors like government regulations, hacks and so on. So, we suggest you to never go into debt and invest money that you can afford to lose.
4. Diversification is essential for successful trading
Multiple coins surged by 100x and 1000x in the year 2017. Such elevation can easily attract the interest of a novice investor and tempt them to put all their eggs in one basket.
Currently, the crypto market has over 1500 cryptocurrencies and you can gain the most out of this market by leveraging diversification technique. It is always a good idea to invest in 3-5 coins to minimize risk and maximize profit. To begin with, you can invest a little amount in bitcoins so that you can escalate the BTC rally and reduce loss while the value of altcoin goes down.
5. Don’t let your emotions take control
It is extremely easy for any trader to get caught up in the excitement associated with a winning streak or depression because of huge losses in a raw. In both situations, the outcome is the same; careless trading that can be extremely costly in the long run. If you open the trading charts and you are uncertain about what to do, it is best not to do anything. Trading when you are not mentally ready will only damage your trading strategy.
6. Avoid FOMO
There is lots of manipulation in cryptocurrency market, many factors are responsible to move the market in upward as well as downward directions. FOMO means fear of missing out, we should never buy in Fomo at all time high and then selling at all time low, so expect dips to come, have patience, don’t catch the running train, wait for the train to stop at next stop and catch it.
Remember when others are excited be fearful and when others are fearful be excited.
7. Use a stop-loss
Stop loss is a trading tool designed to limit the maximum loss of a trade by automatically liquidating assets once the market price reaches a specified value. There are multiple types of stop loss that can be used in different scenarios depending on the crypto market situation. It can sometimes be difficult to avoid loss due to the many possible market outcomes, but stop loss can be helpful even for new and inexperienced traders.
8. Take profits at a regular intervals
Since the crypto market is highly volatile, it’s common to see a coin gaining 20–30% in just a few hours. In such cases, investors may get greedy and hope the rise continues. Unfortunately, by failing to redeem profits at regular intervals, they miss out on quick gains.
Whatever your trading goal is, greed never wins. To be successful in the long run, you need to take profits at a regular interval. You never know when the trading asset will retrace and take back all the floating profits you left in the market.
9. Be aware of scam schemes
The rise in cryptocurrency interest has not been without consequences. One of the downsides of new investors entering the market is the increase in the number of scams, frauds, and stories of retail investors who lose their coins to shady ventures. From ICO scandals to wallet theft and fraud, regular consumers can fall prey to crime easily.
10. Learn from the mistakes
We all start as a newbie, we can’t be pro at starting stage, so when we are giving time in the market, then we should analyse daily why my trade is unsuccessful today, what are the measures i have to take next time so that it will be a profitable one, so learn and don’t repeat those mistakes then only we can earn.