At the beginning of February Changelly launched a new column together with a professional trader and an ex-Wall Streeter. So, here is a new portion of the juiciest insights from someone, who started trading at the time no one even heard of cryptocurrency. Times have changed, as did technologies, but trading basics are still the same. To build the right trading strategy and not get destroyed, you need to follow a set of simple rules mentioned below. Also, if you’ll still have any questions after reading, feel free to ask them in the comments below the article. Have a nice read and profitable trading!
Table of Contents
Do Not Follow Other People’s Advice
Keep in mind, that when someone posts investment tips in anonymous Telegram chats etc. they don’t do it out of kind-hearted desire to put money in your pocket. They spent time and effort and usually have a specific agenda: it could be that they are “talking their own book” – meaning urging you to buy what they already own, so you help their cause by pushing the asset higher, or it could be them building up their own prestige/brand value by making predictions and boasting the ones that came true afterward.
So just stay cautious and clearheaded and filter any such info through the prism of your own agenda/goals/needs. If still there is a source that looks of value to you, spend some time tracking it for statistical validity before you bet any real money on it.
Do Not Put All Your Eggs in One Basket
Another common mistake is putting 100% of your money into a single coin/trade idea. No matter how much you like the coin, there is a big enough probability that it won’t play out the way you wish – there are no guarantees and “sure things” in this world. And actually, the more you toy with the idea, the more you tend to like and get emotionally attached to it. This is where your objectivity suffers as you start to sugarcoat and embellish in your head your soon-to-be moneymaking idea. You only see upside profit potential, downplay or even completely forget about the risk and tend to experience what’s known as the FOMO (Fear of missing out) effect. In case the trade idea doesn’t work, you are hit with a “cold shower” of the reality of a 100% total loss and left financially ruined and morally devastated. So split up your risk capital into 5-10 parts, so you never bet more than 10-20% on a single coin.
Use a Sell Stop Order
Before you even buy your first coin, you absolutely have to learn what a Sell Stop order is – an exchange order that sells your coin if and as soon as it drops to a certain (determined by you) price level. Let it become a habit for you to place such orders for each coin you buy – they will save you a lot of money in the long run. You are not always monitoring coin prices and even when you do, no one has the robotic discipline to act when needed, so a placed Sell Stop order will take care of your coin price going against you.
Do Not Average Down
A common grave mistake many traders make is Averaging Down – buying more of the coin as the price drops with the logic that a good thing is now cheaper (an even better bargain). What most people don’t realize is that you can’t apply such everyday household logic to trading:
- When you buy a financial asset, you only do it because you think it’ll go right up based on some analysis, so price going down only means one thing – your analysis is wrong and the market shows you the proof, so the lower the price drops, the “wronger” you are!
- Also, are not bargain hunting for consumption products that you will eventually eat – the cheap coin will just sit in your wallet tying up your funds with no use.
It was not that complicated, was it? Bookmark this article and reread it every time you doubt about your trading decision. You’ll thank us later. Also, follow us on social media to always stay on a cutting-edge of crypto market news:
Nice swaps, #Changellions!