Crypto Trading: 5 Tips for Beginners

Crypto Trading

Many people want to trade cryptocurrencies because these assets’ prices may rise and fall sharply many times within one day. Potentially, it means a lot of profit-making opportunities for scalpers and swing traders. To make things easier for beginners, there are convenient trading apps allowing you to open and close positions on the go, provided that you have a stable internet connection.

Can trading crypto be lucrative? Yes, if you understand that this unique asset class requires a special approach. Below are five tips to help a newbie capitalize on crypto’s trademark volatility.

#1. Remember That High Volatility Has Two Sides

Cryptocurrencies are extremely volatile. For instance, on March 12, 2020, BTC dropped by more than 39% within one day. By May of that year, it fully recovered and started to grow again. This staggering decline may look like a good thing for those who took advantage of it. Still, a lot of less stress-resistant traders suffered significant losses.

As a trader, you can benefit from both rises and falls, but it may be very difficult to foresee the price direction. High volatility can be rewarding or dangerous depending on what side you find yourself.

Always remember that the crypto market is still rather young and small. Therefore, it’s highly sensitive to news and rumors. Besides, many crypto traders lack experience and tend to follow the crowd. It may result in dramatic price drops or surges, depending on the prevailing market mood. Last but not least, big moves of Bitcoin whales may have an outsized impact on the whole market.

The influence of such factors may be hard to evaluate, so we highly recommend that you master the basic risk management techniques.

And never ever use the money you cannot afford to lose for trading. This rule is doubly true for cryptos.

Also Read  For Facebook Some Things That 2019 Holds

#2. Start with a Demo Account

Using a demo account is a must for those who do the first steps in crypto trading. Though it cannot bring you real profits, you will accumulate the needed experience.

Trading on a demo account helps you:

  • develop a feel for the market and understand what drives prices up or down.
  • explore the platform’s tools and learn to use them to your benefit.
  • hone your trading skills in a safe and stress-free environment.

When choosing a trading platform, find out whether it provides this useful option. For example, Olymp Trade, one of the well-known trading platforms, comes with a demo account funded with virtual $10,000. This money is replenishable, so you can use them until you feel skillful enough for the real thing.   

#3. Choose Coins with High Liquidity and Trading Volume

For a short-term trader who speculates on price movements, it’s essential to opt for some of the most traded cryptocurrencies. These coins are highly liquid, meaning you can quickly buy or sell them at a price that reflects their fair market value.

The most liquid cryptos are Bitcoin (BTC) and Ethereum (ETH). They boast the highest trading volume and market cap. There’s a lot of trading activity around each of these coins, and it may result in significant intraday price fluctuations.

Also Read  Wall Street Rises, Limps Across the Finish Line of a Turbulent Year

#4. Know Your Coin, Follow the News

Apart from macroeconomic factors, the price of a coin depends on its perceived value. This value depends on if its blockchain platform has something good to offer and delivers its promises.

Is the development team able to meet their deadlines? If a long-awaited update has been shifted to next year due to unforeseen technical issues, it’s a disappointing sign.

Is the project involved in a high-profile lawsuit or having problems with regulatory authorities? It’s a red flag that may signal the price decline.

Among other things, pay attention to events called “burnings” and “buybacks.”
Without going into technicalities, these terms mean that the project removes a certain number of native coins out of circulation. As burning makes the coin more scarce, its price is likely to go up.

To keep updated on what is important, follow the crypto news and check out on the projects behind your preferred coins. There are a lot of crypto-themed resources, including Telegram and YouTube channels.

#5. Control Your Emotions

Managing your anger, fear, anxiety, and greed is essential if you want to become a successful crypto trader. These deep-rooted emotions are very powerful as they have been helping people to survive and evolve through competition. Watching your kinsman achieve things you don’t have is supposed to be a positive motivation. Getting angry at yourself for underperforming should make you work harder.

Unfortunately, these emotions may be ruinous for traders. For instance, FOMO (Fear-of-Missing-Out) makes you fall for cheap shitcoins that have no real value but promise quick multiple returns. Greed makes you miss an opportunity to sell your crypto at its peak before the price starts to decline.

Our advice is to avoid emotional trading. Do what your strategy dictates, even if your intuition tells you to do the opposite. It is a proven way to preserve your mental health and avoid massive losses.

Remember that you cannot outsmart the market in 100% of cases. However, a solid strategy and thorough research help you make sustainable profits at the end of the day. On the contrary, fear of loss or euphoria caused by one profitable deal often lead you to poor decisions.

Read books on trading psychology to know how to keep our emotions under control.

Also Read  The New Review Site for Online Casinos in Canada at Casino Zeus

Recap 

As you can see, most rules of crypto trading are not specific to this asset type. You should keep your emotions in check, stay updated on the events that may affect your asset directly or indirectly, and choose a reliable platform with a demo account.

At the same time, cryptocurrency is an innovative asset that comes with unique risks and promises. Therefore, we do recommend that you learn the basics of blockchain technology. It will help you better understand the patterns of price movements and increase your profit potential.

We hope these 5 tips will give you a good start!

error: Content is protected !!