The introduction of blockchain technology and the launch of cryptocurrencies has prompted the interest of traders and investors as there are opportunities of earning money. The key is to know that there is no single way that you can use for gaining profits. Since cryptocurrency is a relatively newer financial instrument, there is a lot that traders have to learn before they can fully understand them. Even then, things might be different in the market because it is evolving rapidly due to the addition of newer cryptocurrencies on a regular basis. Therefore, the tips and advice of professionals can be immensely valuable in such situations.
After all, these are the traders who have been part of this market from the get go and know the insides and out. They can tell you what steps should be taken to trade cryptocurrency successfully. Read on to find out some pro tips to cryptocurrency trading:
Tip 1: Don’t invest all your money into a single cryptocurrency
Many beginners use all their funds for buying a cryptocurrency if they believe it is going to jump awards. This sounds quite reasonable because the more you put in, the more you will earn after there is a price increase. However, it is recommended by professional traders that you do not put all your money in a crypto in a single go.
This minimizes your risks because if your forecasts turn out to be wrong, you will end up losing all of your investment and that’s not something any trader wants. Another reason to do so is for diversification purposes. According to a trading analyst from GigaFX, investing in a single coin means that you will not be able to take advantage of the opportunities presented by other cryptocurrencies that may also be promising.
Tip 2: Use funds that you can afford
New traders who have just entered the industry and are watching the charts for predicting moves may make some crucial mistakes. They believe that they can become rich in a couple of days. If they don’t have any additional money, they begin to explore other options for getting funds like obtaining a loan from the bank. But, the problem is that this route can lead to bankruptcy. If you end up losing borrowed money, you will have to pay back the loan and also deal with the interest payments. This means your losses will double.
As per professionals, it is better to start with using your own savings for trading or reinvesting part of your profits later on. Moreover, when you are using your own money for trading, there is a lesser chance of you panicking about losing everything, which means you will be less vulnerable to emotional mistakes that traders are known to make.
Tip 3: Be ready for losses
This may come off as rather strange, but professional traders are aware of the nature of financial markets, especially when it comes to cryptocurrency. Since they are a relatively new instrument, cryptocurrencies are very volatile and placing a trade means that there is no guarantee that it will turn out to be profitable. Even if a strong strategy is used, traders can still lose money. While every trader wants to maintain stable growth of their trading account, they should be prepared for losses if they want to win the war. This is one of the reasons why professionals recommend that only a small sum is risked in a single trade.
Tip 4: Use special techniques for analyzing coins
Buying low and selling top is often recommended by professional traders. Sure, it sounds quite straightforward, but when you actually begin trading, it becomes apparent that finding the market tops and bottoms is easier said than done. There are several ways this can be done like technical analysis. But, why should you do this? When people go shopping, they try to find the best bargain in order to keep their costs at a minimum.
When it comes to cryptocurrency trading, you don’t have to do a comparison of price because they are already present in the chart, but you do need to understand whether the price is suitable for you or not. There are websites such as GigaFX which give you tools to make such analysis. You need to perform an analysis and buy cryptocurrency at a low price and sell it when it increases.
Tip 5: Don’t follow the crowd
A number of beginner traders are known to use trader recommendations for buying and selling cryptocurrency. But, professional traders will tell you that they never try to follow the crowd because they have their own strategy in place. There is no need to follow the mood of market players or their preferences because these do not provide you a real picture of the market and can often mislead you into making the wrong decisions.
Tip 6: Opt for different time frames
No matter what cryptocurrency you choose, it is recommended by professional traders that you opt for more than one time frame for analyzing it. If you decide to stick to one chart, you are only going to limit your opportunities. Even if you decide to go with an hourly time frame, you need to select a daily or weekly one to get a complete picture of the market. Why is this important? The primary reason is that you will get a general view of the market and this will allow you to understand both mid-term and long-term tendencies of a cryptocurrency. In this way, traders are able to highlight better trading opportunities.
Tip 7: Don’t stop learning
One of the most valuable tips that professional traders have to offer to newbies is to not look for any edge of learning because there is none. The fact is that studying is a never-ending process when it comes to trading. Sure, you can start trading when you have developed a strategy, but it doesn’t mean that you can become complacent and believe that the profits will jump right into your pockets without any difficulties. The markets change and these changes need to be monitored and included in your strategy to give you the desired results.