Crypto trading is not a simple venture to master due to its high volatility. From high volatility to sketchy ICOs, nothing guarantees profits from the crypto market. Still, you keep on hearing news about people making large profits with crypto trading. You can own internet money with crypto trading, which cannot be confiscated or censored by a government or a third party. Let us have a look at the dos and don’ts of crypto trading in this article. But before we go deep into it, let us discuss what crypto trading is and how it works.
Crypto Trading
Crypto trading involves the best crypto exchange of one cryptocurrency for another and the exchange of fiat money for cryptos. It also entails buying or selling coins. The total number of cryptocurrencies that you can trade has exploded in recent years. To be more precise, there are over 1500 cryptos.
How Does Crypto Trading Work?
The buying and selling of cryptocurrencies take place through exchanges; they can be stored in wallets. Cryptocurrencies are available as shared digital records of ownership and are stored on blockchains. One user can send crypto units to another using digital wallets. Once it is verified and added into the blockchain through mining, the transaction is considered final.
Cryptocurrency Trading Techniques & Strategies
To become a successful crypto trader, you will need an efficient trading strategy or we can say trading styles. A crypto trading strategy refers to a trading plan that you will follow while executing your trades. This plan will consist of the type of assets you will invest in, your investment size, and your trading frequency. This plan can be based on the following strategies used by successful traders or can be completely new:
Day Trading Or Scalping
The crypto market’s Day trading strategy lets traders take full benefit of the cryptocurrency assets’ price volatility. Day trading strategy refers to a game of number strategy. Day traders make many trades every day, purchasing at low prices and selling at higher prices with little profits that later compound to bigger amounts. Though scalping is a segment of day trading, it generally entails short trading periods.
Margin Trading
Margin trading refers to a trading method. It lets traders use borrowed capital for opening positions. By trading on margin, the results are amplified in any direction. If you win, you get bigger rewards. But, if your trade goes in the other direction, you can lose a lot.
Position Trading
Also known as trend trading, this trading strategy entails long-term investing. Investors or traders will generally invest or buy an asset when its price is low. They will sell when its price is high. The main difference is in the timeframe between the opening and closing positions. Tradesset up via this strategy can take months or even years.
Swing Trading
The time period differs from swing trading. In scalping and day trading, traders generally open and close a position many times in a day. Whereas in swing trading, it occurs in longer periods. It can take anywhere between a few days and months. Swing traders take benefits from incoming and ongoing trends.
The Do’s of Crypto Trading
Manage Risks
Managing the risks you are ready to take while trading cryptos is essential for your survival in this market. Various risk management techniques like stop-loss will let you limit your amount of risks per trade. Another way to manage your risks is by taking a break from the market after three consecutive losses.
Diversify
Diversification is the key in the crypto trading world. Spreading the investments across a variety of assets can help you become successful. Don’t place all your trades in a single cryptocurrency. Put smaller positions on various digital currencies. Thus, if one crypto falls, you will not risk all your money.
Research
If you are thinking of investing in cryptos directly, it is vital to make sure you do your research. It would be best if you continued doing so even after you have begun operating in the markets. The first step before you invest in a crypto is to read the company’s whitepaper. By getting information from there, you can determine which is the best investment for you and the consequences you likely face.
Have A Strategy
You may have come across some success stories about different people who invested in the mainstream cryptos and made millions. But this isn’t a dependable way to make money; you should have a proper trading strategy in place to enjoy great returns consistently. Your strategy should clarify whether you are trading for the long-term or short-term. What technical indicators do you want to use – MACD, RSI, or EMA? Do you want to use a trading bot? It is what you should decide before every trade.
Plan Your Budget
Before investing, you should plan your budget. Even the best market players care about their budget beforehand. Never place your financial stability at risk. Invest what you can afford to lose. Ensure to put your debt under control as well.
The Don’ts of Crypto Trading
Don’t Trade Without A Trading Plan
The foundation of a successful crypto trader is a good trading plan that details everything like where they wish to go, where they are, and how they will get there. Before placing any trade, ask yourself about your goal and how you will complete it. It can take a little time as research is involved. But if you trade without a trading plan, you are just doing gambling. Like this recent StormGain review offers several features or a UI that helps a trader for their chosen trading plan.
Don’t Choose Cryptos Without Research
Before investing in cryptos, you should know all that is possible about the asset. What is its purpose? Who is behind it? And more. Do not buy crypto without knowing its details. Taking some time to research will let you make informed decisions.
Do Not Trade Without Stop Losses
Stop losses are your seatbelts on your way to victory. If you do not place stop losses, you cannot be a cryptocurrency trader for long. Setting stop losses can get you out of trades that are not going your way.
Do Not Be Greedy
Greed is the top enemy of every investor; everyone can be too greedy. But it would be best if you controlled it while trading in the crypto market. An efficient trading strategy and good margins can also turn into a large loss due to greed.
Don’t Trade Under Emotions
Trading emotionally is never good, particularly while trading cryptos. Making decisions emotionally can do more harm than good. Crashes in the cryptocurrency market will not be irrevocable. Hence, a clear mind and patience will help you to wait out the hard times.
Conclusion
Along with the do’s and don’ts mentioned above, you should keep your head cool while trading cryptocurrencies. Many traders panic at times due to the different factors in the crypto markets. It makes them take decisions that are not profitable. Investors should keep updated with the crypto market news to stay abreast of the latest research and updates.