1. Have a motive for entering each trade
This is an important decision. Whether your purpose is to day-trade or to the 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.
Whether you are a day trader or scalper, sometimes you’re better off not gaining anything on a certain trade than rushing your way into losses.
Every trade we get into requires us to know when to get out, whether we’re making a profit or not. Establishing a clear stop loss level can help you cut your losses.
Choosing a stop loss is not a random activity. The most important thing to note here is that you shouldn’t be carried away by your emotions – a great point to set your stop loss is at the cost of your coins. The same applies to profit levels if you target to get out of the market after hitting a certain minimum profit; stick to that.
3. Stay calm and watch your back
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. The next thing that happens is for the red candles to start popping up due to an oversupply and, voila, losses start trickling in.
4. Take risks with caution
Avoid running after seemingly fantastic profits. Instead, they observe and gather small but sure profits from regular trades.
In addition, 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.
5. Underlying Assets Create Volatile Market Conditions
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.
The market is normally foggy when the Bitcoin price is volatile. As you would imagine, this prevents most traders from gaining a clear understanding of what goes on in the market. At this point, it is advisable to either have close targets for our trades or simply not trade at all.
Buying a coin because its price seems to be low or affordable can cost you a lot. The decision to invest in a coin should have very little to do with its affordability but a lot to do with its market cap. The conventional stocks are gauged by their market caps. It is evaluated using the formula Current Market Price X Total Number of Outstanding Shares, the same applies to cryptocurrencies.
There is no difference between having a coin priced at $10 per coin with a total number of 1 million shares in the market and the same coin being priced at $100 with 100,000 shares in the market. For this reason, it is more justifiable to use a coin’s market cap to decide whether to invest in it than using its price. The higher a coin’s market cap, the more suitable it is for investment.
7. Exercise caution with Crowd-Sales/ICOs
A lot of people have lost numerous investments because of ICO scams, this is why you need to exercise caution when looking to invest in any ICO.
It’s all about paying close attention to those details that most people seem to overlook while only focusing on the promised returns.
Do your homework. Conduct a background check on the team behind the project and analyze their ability to deliver on their promise. In addition, you should also look at the viability of the idea behind the ICO, poke holes in the project’s white paper, and seek answers where necessary.
8. Diversify, Diversify, and Diversify!
Investments are unpredictable. Even those that seem to have positive returns can come crumbling down under certain economic conditions. Cryptocurrencies are even more unpredictable. As much as you can reap profits in thousands in a day or less, the opposite is also true. You can lose everything you invest in digital assets in a flash of a second. So, the best way to get past such uncertainties is through diversification.
To conclude, leverage the goal-setting feature by placing sell orders. Ensure that you set your revenue targets by placing sell orders in the order books. You never know when your order price will be met, earning you exactly what you needed. Besides, sell orders attract fewer transaction fees since they are the market “makers”.
Take it easy while trading: learn to trade with our emotions and keep your eyes on the goal.