Cryptocurrency has exploded since the invention of Bitcoin in 2009. While people have gained millions trading it, it can be risky to invest in cryptocurrency, especially if you are unfamiliar with the market. Following these tips can help you make the most out of your trades.
- Understand That Crypto is Volatile, So You Need to Diversify
It’s not unusual for a price to rise rapidly in cryptocurrency, just as the Dogecoin price did when Elon Musk tweeted about his investment. It’s also just as likely that you could lose money when you invest in this volatile market. That’s why it’s important to diversify by investing in stocks, real estate, or mutual funds so that if one investment crashes, you still have others that retain their value.
- Be Intentional and Avoid Emotional Trades
Like all investor trading, put your emotions in the backseat. Don’t panic sell if prices fall, and don’t hang on to a coin because you are afraid of missing out on bigger profits. When you let your emotions guide you, you will lose money. Instead, make your decisions based on hard data and market trends.
- Set Clear Profit Targets and Stop Losses, and Stick to Them
Set a clear profit target (the amount you want to make when you trade) and sell when your stock or currency reaches that price. Establish a stop loss at the amount you paid for it. In other words, if you paid $10 for it, trade it when it falls back to $10, so you don’t lose money.
- Learn the Lingo
When you are new to the market, people talking about cryptocurrency seem to be speaking a foreign language. Consult a glossary of cryptocurrency terms and keep it handy when you start trading, so you don’t make mistakes due to a lack of knowledge.
- Manage Your Risks
Don’t chase a get rich quick trade because those don’t exist, and if you see one, there’s a good chance it’s a scam. You are in cryptocurrency trading for the long haul, so it’s best to focus on small but sure profits to build your portfolio’s value over time.
- Use Market Caps to Determine Investment Suitability
Often people decide to invest when prices are low, but that can be misleading. Instead, look at the coin’s market cap, which is determined by taking the current market price of the coin and multiplying it by the number of outstanding shares.
- The Higher the Daily Trading Volume, the Better the Long-Term Investment
The most low-risk way to make money trading cryptocurrency is to be in it for the long haul and make slow gains over time. Look for coins with higher daily trading volume, as those are your best opportunity for long-term growth.
- Always Place Sell Orders in the Order Books
The cryptocurrency market can be unpredictable since it is a global 24/7 market, so place sell orders in the order books. When your sell amount is triggered, you’ll know to sell to avoid losing money.
- Look for Patterns
Like the stock market, the cryptocurrency market has a cycle to it. Consult the cryptocurrency rotation so you know the best time to trade.
- Pay Attention to ICOs to Avoid Scams When Investing
ICOs are initial coin offerings, similar to IPOs in the stock market. They have the potential for fortune-making returns, but that means they are appealing to scammers. Do background checks, read their white papers, and ask questions to determine the validity of the ICO before you buy.
- Recognize that Altcoins and Bitcoins React to Each Other
Bitcoin controls the rest of the market. If Bitcoin is up, other altcoins are generally down. However, that’s not always the case. The most important thing to remember is that if Bitcoin is unsteady, the entire cryptocurrency market will be more unstable. Even if you aren’t investing in Bitcoin, you need to pay attention to its current value.
The Number One Rule of Cryptocurrency
We cannot stress this enough: cryptocurrency may seem like easy money since the news is littered with stories of self-made millionaires, but those occurrences are rare. Educate yourself and trade for long-term gain. You’ll set yourself up for success when you make wise decisions based on data and market trends.