Experts in investment banking, portfolio management, fund managers or even the everyday trader will often give unexpected advice, and most of the time follow different strategies of investing in cryptocurrencies. In case you’re not already a pro, or adept crypto trader, let us get on the same page in terms of lingo. For this, please check out our Trading Glossary.
And now here’s a few tips on trading crypto to get you started.
Time is Everything
A week in the crypto market, in literally months in the traditional stock exchange environment, in terms of ups and downs. If you’re a person who wants to delve deep into the crypto world, and make some serious value on your investments, then it’s not enough if you only have the time to check up on your currencies once a day or so. It’s imperative to check it on an hourly basis, or at least 6-7 times a day in proper intervals. Another aspect of time to consider, is the amount of it spent in the process (checking, analysing, doing research). Sometimes it’s more worth it to be a long-term investor, over a daily one. It’s very important that you stamp a price tag on the time spent, everything has a marginal cost. It is recommended that you take it easy in the beginning, and analyse your performance vs the time spent. Don’t be surprised if you’ll end up negative from the start, you’re just teething.
Have a Plan
For every position you enter the blockchain by purchasing crypto, you must set an accurate target level at which to take profit, and more importantly, a level at which you’ll stop taking losses. Too many times users have failed when they have failed to correctly choose a stop loss level. You probably end up thinking, “Oh no, I’m sure it will turn around and I will get out of this trade with a minimal loss, no biggie, this guy on Reddit said so!” It’s all about ego, and unlike the traditional stock market where 2-3% is considered extremely volatile, it’s not as unusual to find a coin dumping it’s value by 60% in just two hours or so.
Ignore a lot of the news, and what you hear on the internet
A lot of the stuff you hear on the news, and the majority of what you read in traditional media is biased, and promoted by one company or group. It would be more ideal to invest your time in looking at the stats, and finding the trends on your own. You won’t find your next investment opportunity by just reading the news, but by looking at the numbers. I mean think about it, if it appears in the news, then others must know about it, so it probably doesn’t have much value. Also, don’t try and compete with others, every person is different, their risk appetite is different, their timing is different and so forth. Your skills, and trades will only improve if you focus on the trends you’re analysing, over listening to your friend, or what some random guy/girl told you over the internet not so long ago. Competing will lead to unhealthy FOMO trades, and that’s our next tip.
Trading, or not trading because of FOMO is bad
Be aware of the ‘Fear of Missing Out’ or what the seven deadly sins may refer to, as Greed. It sure is cool to see a coin being pumped like hell and seeing it rising to double-digit gains in just a couple of minutes. That bright green upward pointing line flirting with you across the screen isn’t as monogamous as you think. With hundreds of people flooding Reddit and BitcoinTalk exclaiming that ‘This coin is the future!’ and ‘Look at that pump #feelingbullish’. You then start thinking about joining in on that bandwagon. Well it’s very possible that a lot of people made their investment ahead of you, and that the market could continue in one direction. One thing you have to keep in mind is that the whales are just waiting for people like you on the way up to sell you their coins they bought for cheap, and with the price so high it’s clear that the currently ‘lucky’ holders only consist of the little fish. It’s needless to say what happens next, let’s just say that green, flirtatious line mentioned before suddenly shows who she really is, and ends up in a downward spiral. Some might call this, a classic pump and dump!
Altcoins are traded against Bitcoin
Most people think that most altcoins are traded against FIAT, they’re wrong. Bitcoin is greatly volatile next to almost all FIAT currencies, and this is something to consider when Bitcoin is moving swiftly. You’ll find that in previous years, Altcoins and Bitcoin have an inverse relationship among one another, although many people may differ on this since the crash of 2018. Regardless, when Bitcoin is volatile, everything becomes a little unclear nowadays, so I would recommend keeping the second tip in mind.
Think about the Future of your Portfolio
Let’s face it, only a few cryptocurrencies will survive the next decade or so. Looking at the top 20 coins on coinmarketcap or coin360 will surely give you an idea who will live across the years to come. It’s highly unlikely that Bitcoin will be removed from it’s first place in the rankings, while across the years the rest of the places change from year to year. It’s good to think about the percentage you’ll keep of these altcoins in your portfolio vs the all-father (Bitcoin).
Security of your assets is Important
As long as the world’s money is FIAT (euros, dollars sterling and such) then you should measure your portfolio’s value in FIAT currency. Don’t forget, until the FIAT reaches your bank account, you haven’t cashed out, and with cryptocurrency having no insurance, and if you are not following proper security (2FA, Proper KEY Storage) then you can quickly lose your funds despite being a successful crypto trader. It is imperative to follow your exchange’s guidelines, verifying your identity if you’ll be depositing a large amount of crypto and ultimately being cautious of your assets. If you keep a level mind, then you should be good to go.