So you’ve decided to start trading crypto? Congratulations! If you’re looking to get into the exciting and lucrative world of cryptocurrency trading, you’ll need to know a few things first. In this article, we’ll give you six useful tips to bear in mind when starting. So whether you’re a complete beginner or an experienced trader, read on for all the advice you need to make money trading crypto.
1. Find the Right Brokerage
Before starting to trade, it is important to find the right brokerage. This is a platform where you can buy and sell cryptocurrencies. Many different brokerages are available, so it’s important to do your research before choosing one. With the right broker, you’ll be able to trade quickly and easily. You’ll also have access to various features, such as charting tools and market analysis.
Some factors to consider when choosing a brokerage include the fees, the ease of use, the security, and the available assets. Make sure to read reviews before making your decision. For instance, you can read more about eToro features if you plan to use this platform. Ensure that the platform you choose matches your trading needs and style. This way, you won’t have any issues when you start trading.
2. Create a Trading Plan
You need to create a trading plan when investing that should include your goals, the time frame in which you want to achieve them, and the strategies you’ll use. For instance, will you trade based on technical analysis or fundamental analysis? What assets will you trade? What risk management strategies will you use?
You should also set realistic goals. For instance, don’t expect to double your investment in a month. If you’re new to trading, starting small and gradually increasing your position size as you gain experience is best. This situation will enable you to learn and make mistakes without putting your entire investment at risk. You can work with experts to create a trading plan that suits your needs.
3. Choose the Right Assets
There are thousands of different cryptocurrencies available on the market, so it’s important to choose the right ones to trade. When selecting assets, make sure to consider your goals, risk tolerance, and investment horizon. For instance, if you’re a risk-averse investor with a long-term time frame, you might want to invest in large-cap coins, such as Bitcoin or Ethereum. These assets are less volatile and more likely to generate returns over the long term.
On the other hand, if you’re a more aggressive trader with a short-term time frame, you might want to trade smaller-cap coins that are more volatile. These assets are more likely to generate higher returns in the short term but are also riskier. Choosing the right assets will enable you to meet your goals and minimize losses.
4. Diversify Your Portfolio
Once you’ve selected the assets you want to trade, it’s important to diversify your portfolio. This means investing in different types of assets to minimize risk. For instance, you might want to invest in a mix of large-cap and small-cap coins and different types of crypto assets, such as utility and security tokens.
Diversifying your portfolio will protect you from losses if the price of one asset falls. This way, you’ll still have other assets that are doing well to offset the losses. The key is not to put all your eggs in one basket, as this is too risky. If possible, invest in a mix of different asset types to reduce your overall risk.
5. Do Your Research
Before investing in anything, first you need to do some research. This research should include reading about the asset, history, and potential future prospects. For instance, if you’re considering investing in a new altcoin, read about the team, the technology, and the roadmap.
You should also stay up-to-date with news and developments in the crypto space. This way, you’ll be able to identify new opportunities and potential risks. You can do this by following crypto news outlets and social media accounts. A good example is when Bitcoin Cash hard forked from Bitcoin in 2017.
6. Have a Motive for Each Trade
It is essential to have a motive for each trade you undertake. This means knowing why you’re buying or selling an asset. For instance, are you buying an asset because you think the price will increase? Or are you selling an asset because you need to cash out?
Besides this, you need to have an exit strategy for each trade. This exit strategy should include your targets, stop-losses, and profit-taking levels. Having a plan for each trade will help you manage your risk and make better decisions. You can also use a trading journal to track your progress and performance.
7. Start Small and Gradually Increase Your Position Size
If you’re new to trading, starting small and gradually increasing your position size is important. This way, you can learn and make mistakes without putting your entire investment at risk. You can also work with experts to create a trading plan that suits your needs.
You can increase your position size as you gain experience and become more comfortable with trading. However, it’s important not to put all your eggs in one basket and to diversify your portfolio. This will help you minimize losses if the price of one asset falls. For instance, if you’re investing $100 in a new asset, don’t invest more than $20 in any position.
8. Set Profit Targets and Stop-Loss Levels
It is important to set profit targets and stop-loss levels when starting trading. This will help you manage your risk and take profits when the price is right. For instance, you might want to set a profit target of 20% and a stop-loss level of 15%. This means you’ll take profits when the price reaches 20% and stop losses when it falls to 15%.
Remember that you don’t have to wait for your targets to be reached. You can exit a trade anytime if you think the price will fall. The key is to manage your risk and take profits when you can. A good example is when the price of Bitcoin fell from $19,000 to $12,000 in December 2018.
9. Be Prepared to Lose Money
Why should one be prepared to lose money? The reason is because the market is highly volatile, and prices can fall quickly. For instance, between December 2017 and January 2018, the price of Bitcoin fell from around $19,000 to $11,000. So if you’re not prepared to lose money, you should not trade crypto.
Also, never invest more money than you can afford to lose. This is because there’s always a risk that you could lose all of your money. So only invest what you’re comfortable with losing. You can start with a small amount and then gradually increase it as you become more comfortable with trading.
10. Welcome to FOMO!
FOMO (fear of missing out) is common among crypto traders. This is because the market is highly volatile, and prices can move quickly. So if you see a big price move, it’s natural to feel like you’re missing out.
However, it’s important not to let FOMO take over your trading decisions. This is because you might make impulsive decisions that could lead to losses. So it’s important to stay calm and rational when trading.
The best way to overcome FOMO is to have a plan for each trade. This plan should include your targets, stop-losses, and profit-taking levels. A plan will help you make better decisions and stay disciplined when trading.
11. Don’t Always Buy When Prices are Low
Just because the price of an asset is low doesn’t mean it’s a good time to buy. This is because the price could continue to fall. So you should only buy when you think the price will increase. Also, the price being low does not mean it’s undervalued. For instance, the price of Bitcoin fell from around $19,000 in December 2017 to $11,000 in January 2018. This doesn’t mean that it was undervalued at $11,000. It just means the market was bearish, and the price went down.
A good way to determine if the price will increase is by doing your research. This includes looking at the asset’s price history, news, and technical analysis. If you’re unsure about an asset, it’s best to stay away from it.
12. Be Patient
You need to be a bit patient when trading crypto. This is because the market is highly volatile, and prices can move quickly. So you might need to wait a while for the right opportunity to come along. For instance, you might see a big price move, but it might not be the right time to buy. If you’re patient, you’ll eventually find the right opportunity.
The key is to stay disciplined and wait for the right opportunity. If you force trades, you’re more likely to make impulsive decisions that could lead to losses. If possible, find other things you can do while waiting for the right opportunity. This will help you stay patient and avoid making impulsive decisions.
13. Use Goal Setting Features
Most crypto exchanges have goal-setting features. This allows you to set a target price, and the exchange will automatically buy or sell when the price reaches your target. This is useful because it takes the emotion out of the equation. For instance, if you see the price of an asset rising, you might be tempted to buy it. However, if you have a target price set, you’ll wait until the price reaches your target before buying.
This can help you avoid mistakes and make better decisions. It’s also important to note that you should not use goal-setting features with leverage. This is because they can lead to large losses if the market moves against you.
14. Develop a Risk Management Strategy
Ensure that you have a risk management strategy in place when investing in Crypto. This strategy should include setting stop-loss and take-profit orders. Stop-loss orders will limit your losses if the price of an asset falls. Take-profit orders will enable you to lock in profits when the price of an asset rises.
Also, you need to manage your position size. This means not putting all your eggs in one basket and not risking more than you can afford to lose. For instance, if you have $1000 to invest, don’t put it all into one trade. Instead, consider investing $100 or $200 per trade. This way, even if the trade goes against you, you won’t lose your entire investment.
When it comes to trading crypto, you should keep a few things in mind. First, choose the right broker, set realistic goals, and don’t expect to double your investment overnight. Second, choose the right assets to trade based on your goals, risk tolerance, and time frame. Third, diversify your portfolio to reduce risk. And fourth, do your research and stay up-to-date with news and developments in space. By following these tips, you’ll be on your way to success in the crypto market.