You may have heard about success stories of people who have made enormous profits from trading cryptocurrency. The question is what did they do differently?
Here are 7 things you should follow to give you a shot at being a successful cryptocurrency trader.
Invest funds you can afford to lose.
January 2018 witnessed the shocking crash of the cryptocurrency market in which prices dipped by a significant percentage. It is important to note that the moment you convert your money to cryptocurrency, you should consider it as lost forever.
The market is susceptible to changes arising from government policies, hacks, and bugs. Therefore, in the event that one or more of these factors cause you to lose money, make sure it is money you can afford to lose.
Be informed of your investment
You would hardly go for an exam without ever preparing for it. In the same vein, you should never invest in a trade you know nothing about. There are individuals who seek to prey on less-informed traders by enticing them to buy certain coins, only to make away with their money at the end. You should take responsibility for your investments by doing the necessary background check of every piece of information you receive.
Monitor Bitcoin closely
Altcoins; with the exception of Bitcoin, was pegged more closely to Bitcoin than Asian currencies were to the US Dollar when the Asian Financial Crisis occurred. High Bitcoin prices mean lower altcoins prices as people abandon altcoins to cash in Bitcoin profits; on the flip side, when Bitcoin prices crash, the price of altcoins also drops, allowing investors to exchange them into currency. Monitoring the growth, decline or stagnancy of the price of Bitcoin can enable you to make informed decisions regarding your altcoin.
Be content with what you make
It is easy to get carried away in the thrill of seeing your coins grow. If you allow your greed get the better of you, you could end up losing the profit you’ve built up over time or even hitting a loss. Timing is everything in cryptocurrency trading – knowing exactly when to pull out and coming back to scout for potential benefits is the hallmark of a good trader.
Have backup plans
It’s simple logic that the more you invest into a coin, the higher the possibility you’ll make more money, however, there’s also the possibility of losing more too. Diversification is the best way by which you can reap the benefits of investing in multiple coins – a classic case of not putting all your eggs in one basket.
Learn from your experiences
No one is infallible. When you make mistakes, use the experience to plan your next move. Evaluate what you did wrong or where you can improve. Carry this knowledge into your next trade. Learning from the experience of others can also be beneficial. You don’t have to part with your money just by making the mistakes others have made, when you could have just avoided the pitfall. Learning from experience – yours or others will make you a better trader.
Set stop losses
If you’re into active trading, it is important you set stop losses, particularly for coins you haven’t set aside for long-term holds. The benefits are that you can reduce the amount of loss incurred, you can also set a limit which serves as an acceptable loss. In addition, you can use stop losses for reference purposes for future trades. A dip in market prices can result in a drop in altcoins prices, stop losses can come in handy by automatically selling for currency that can then be used to re-enter the trade at reduced prices.
Finally, avoid the get rich quick mentality. To succeed in cryptocurrency trading, you must be ready to invest your time, money and effort. Indeed, adopting these guidelines is sure to make you reap bountiful profits on your investments.