Every day, we hear reports on various news platforms about this and that in relation to cryptocurrencies, and the market has been in a state of confusion as a result of the recent market correction.
But that is precisely the problem: everyone appears to be pointing out the issue, but no one appears to be interested in providing solutions. Those who care enough to help others do so for a fee through online courses, paid seminars, and other means.
This is why I felt compelled to write this post and provide some useful tips to help guide your trading during a period when the market appears to be bullish. Aside from the tips, I’ll also share some of the most volatile cryptocurrencies to keep an eye on, as well as the best one for day trading.
These tips are more of safety rules; and as the soldiers would have it, such rules are written in blood.
Even though we’re not talking about risking human lives here, losing your coins due to trading without a proper guideline isn’t a fun moment.
So, how can we avoid making costly mistakes? How can we ensure that we always remain on the green side?
First of all, you need to understand that profitable trading requires a lot of attentiveness; it isn’t a gamble and nor should it ever be one. Other than the following 10 tips, ensure that you pay close attention to the market forces of demand and supply to be able to know when this or that tip applies. It is paramount to internalize every tip in this guide and to understand the reasoning behind it.
With that, let’s begin!
Tips for Cryptocurrency Trading
Tip#1. Have a motive for entering each trade
Now, I know this may sound obvious but it’s important for you to have a clear purpose for getting into cryptocurrency trade. Whether your purpose is to day trade or to scalp, you need to have a purpose for starting to trade cryptos. Trading digital currencies is a zero-sum game; you need to realize that for every win, there is a corresponding loss:. Someone wins; someone else loses.
The cryptocurrency market is dominated by large ‘whales,’ similar to those who place thousands of Bitcoins in market order books. Can you guess what these whales excel at? They have patience; they wait for inexperienced traders like you and me to make a single mistake that results in our money ending up in their hands due to avoidable errors.
Whether you are a day trader or a scalper, it is sometimes better to not gain anything on a particular trade than to rush your way into losses. We can confidently tell you that on certain days or periods, you can only stay profitable by avoiding certain trades based on our years of market analysis.
Tip#2. Set profit targets and make use of stop losses
If you’ve not heard of the term stop loss in trading, check out this link to help you understand what it’s all about.
Every trade we enter necessitates knowing when to exit, whether we are making a bitcoin profit or not. Establishing a clear stop loss level can help you cut your losses, which is a skill that most traders lack.
Choosing a stop loss is not a random activity, and perhaps the most important thing to remember here is that you should not be carried away by your emotions – a good place to set your stop loss is at the cost of your coin. Set the minimum point you’re willing to trade your coin at if you bought it for $1,000, for example. This will ensure that if the worst comes to pass, you can walk away with what you invested in the first place.
The same applies to profit levels if you target to get out of the market after hitting a certain minimum profit; stick to that. Don’t be greedy; it’s never a nice color on anyone!
Tip#3. Welcome to FOMO!
FOMO is an acronym that stands for “fear of missing out.” This is one of the most well-known reasons why many traders fail. From the outside, it is never a good sight to see people making massive profits in minutes from pumped-up coins. To be honest, I despise such situations even more than you do.
But I’ll tell you one thing that’s for sure…
Beware of that moment when the green candles seem to be screaming at you and telling you to jump in. It is at this point that the whales I mentioned earlier will be smiling and watching you buy the coins they bought earlier at very low prices. Guess what normally follows? These coins usually end up in the hands of small traders and the next thing that happens is for the red candles to start popping up due to an oversupply and, voila, losses start trickling in.
Tip#4. Manage Your Risks
Little pigs eat a lot, but big ones get eaten. This is especially true of market profits when trading cryptocurrencies. Wise traders never run in the direction of massive profits; nope, they don’t!
Consider investing less of your portfolio in a market that is less liquid. Such high trades require more tolerance, while the stop loss and profit target points will be allocated further from the buying level.
Tip#5. Underlying Assets Create Volatile Market Conditions
The prices of most altcoins depend on the current market price of Bitcoin. It is vital to understand that Bitcoin is relative to fiat currencies and is quite volatile.
The simpler version of this is that when the value of Bitcoin goes up, the value of altcoins goes down and vice versa.
When the Bitcoin price is volatile, the market becomes foggy, which, as you might expect, prevents most traders from gaining a clear understanding of what is going on. At this point, we should either have close targets for our trades or not trade at all.
Tip#6. Don’t Buy Simply Because the Price is Low
Most newcomers make the same mistake: they buy a coin because the price appears to be low or what they consider affordable. Consider someone who chooses Ripple over Ethereum simply because the latter is less expensive.
The decision to invest in a coin should be influenced by its market cap rather than its affordability.
Cryptocurrencies, like traditional stocks, are measured by their market capitalization, which is calculated using the formula Current Market Price X Total Number of Outstanding Shares.
There is no difference between a coin priced at $10 per coin with a total market share of 1 million shares and the same coin priced at $100 with a market share of 100,000 shares. As a result, it is more justifiable to use a coin’s market cap rather than its price to determine whether or not to invest in it. The greater the market capitalization of a coin, the more suitable it is for investment.
Tip#7. A Tip About Crowd-Sales/ICOs
Startups use an ICO (Initial Coin Offering) to give the general public an early opportunity to invest in their idea through a crowded sale. In exchange, these investors are given tokens at a lower price with the promise of selling them at a much higher price once they are listed on an exchange.
Time has shown that ICOs can be quite successful, with records indicating that some tokens ended up being worth more than ten times the projected returns.
But, you may wonder, what’s the catch?
ICOs have clearly attracted a large number of investors due to their high returns; however, a large number of ICOs have proven to be complete scams. People have lost millions of dollars in investments.
When considering investing in any ICO, one must exercise extreme caution. Knowing whether or not to invest in an ICO is not a matter of science; rather, it is a matter of paying close attention to the details that most people seem to overlook while focusing solely on the promised returns.
Conduct a background check on the project team and assess their ability to deliver on their promises. Furthermore, you should consider the viability of the ICO’s concept, poke holes in the project’s white paper, and seek answers where necessary. That way, no stone will be left unturned, and if you still have doubts about the project at the end, you’re better off passing than investing in that ICO.
Tip#8. A Quick One for Altcoin Investors
Many altcoins lose value over time, sometimes in an unusually short period of time. It is therefore critical to understand that whenever you hold an altcoin for the long term, you must be careful not to keep them for too long.
The daily trading volume is one of the best indicators of coins that are ideal for long-term investments. The higher an asset’s daily trading volume, the better it is for long-term investments.
Consider investing in some of the following coins if you want to go long term with cryptocurrencies: Ethereum (ETH), Factor (FCT), Monero (XRM), and Dash. On various exchanges around the world, these have reasonable trading volumes.
Keep an eye on the charts of these coins and take note of the various price spikes – the patterns can help you determine when to sell or buy a coin.
Tip#9. Diversify, Diversify, and Diversify!
Investments are volatile; even those that appear to offer infinite positive returns can collapse under certain economic conditions. Cryptocurrencies are even more volatile.
As much as you can make thousands of dollars in a day or less, the inverse is also true. In the blink of an eye, you could lose everything you’ve invested in digital assets. As a result, diversification is the best way to overcome such uncertainties.
As I previously stated, the value of all other coins is influenced by the value of Bitcoin in relation to the USD. When BTC falls in value relative to the dollar, all other coins fall in value, and vice versa. As a result, you can see that diversifying your portfolio among different coins may not be enough to protect you from bullish markets.
And in the midst of all this, the currency managed to grow its market cap by over thirty times more in the past year alone.
This means that it is okay for traders to keep Bitcoin as their base asset, but they also need to realize the value of the dollar cannot be overlooked. You need to diversify away from the same type of asset to different areas so as to spread your risk.
There are other equally viable investments that are not as risky as compared to cryptos; these include real estate, mutual funds, stocks, and more.
Tip#10. Super Tip!
This final tip will provide you with actionable steps that you can begin implementing immediately in your trading. By placing sell orders, you can take advantage of the goal-setting feature: Set your revenue targets by entering sell orders into the order books. You never know when your order price will be met, resulting in you receiving exactly what you require. Besides, sell orders attract fewer transaction fees since they are the market “makers”.
Take it easy when trading: It is said that the best traders have mastered the art of remaining calm even when things appear to be out of control. Yes, I realise how insane that sounds, but you must learn to trade objectively rather than emotionally.