The number of interest in cryptocurrency trading keeps growing very fast. New assets flood the market frequently and many traders are determined to get the best out of these assets in other to make profits.
The cryptocurrency market cap keeps soaring high due to the volume of trades in the market annually.
Cryptocurrency as we know is traded in a decentralized market, meaning that the government have no control over it. These digital assets are run through several computer networks known as blockchains.
Due to cryptocurrency’s decentralized nature, it is free from any political issues and more so economic issues, unlike local currencies.
On the contrary, it might not be all rosy when trading cryptocurrency online. Due to its decentralized nature, cryptocurrency is highly volatile. This means that market prices fluctuate without notice and frequently.
Crypto is also affected by several factors such as market demand and supply, mainstream media, payment systems and even major world events. Therefore, it is important to know these factors and make good decisions.
Considering the following tips discussed in this article will help you set your compass as you sail the unending sea of the crypto market. Additionally, considering some trading strategies discussed later will also help you become a more refined trader.
5 Tips to Consider in Crypto Trading
Understanding the Crypto Market:
As a crypto trader, the worst mistake you can make is jumping into a trade without fully understanding how it works. It can be compared to a pilot who flies a plane without knowing his destination and air route to follow. Such a mistake can lead to a fatal end for the pilot.
A good crypto trader would ensure he studies the market carefully before making a call. Like the skilled pilot who takes his time to study the air route and set his compass straight, a good trader will study the market trends of digital coins which include knowing their all-time high and low, the chart movement, their support limit and the history of that coin as well as the network in which it is built on.
Devise a Realistic Trading Plan
As a trader, the moment you fail to plan your trade, you might as well be planning to fail on the trade. No successful trader has ever relied on ‘luck’ because it will eventually fail. Developing a trading plan is crucial to your success in the crypto market.
Always know when to make a market call and when to avoid a particular market. Because of crypto’s volatile nature, a wrong market call can blow your portfolio in seconds leaving you in ruin. Develop a profit margin and a loss margin and never shift from it. Most importantly, choose your trading style. Having a style of trade and mastering it sets you aside for success.
Note, however, that it might not always be smooth. Cryptocurrency trading is not a get-rich-quick scheme and therefore, requires patience and consistency in other to achieve your goal. This should always be in your mind before you enter a trade.
Build Emotional Discipline
Developing emotional discipline is a powerful force for staying afloat when the market goes south. As a crypto trader, you must know when to leave the market and when to endure in the market. Thoroughly make market analysis before entering a trade and never develop emotions for any particular coin. These can fail due to several factors and it might end up affecting you or your trade.
Most importantly, set your stop loss and take profit properly to suit what you can bear. Sometimes, a particular trade might have great potential and might keep rising exponentially. This can tempt you to continue adjusting your take profit so that you can make more profits. But note that a great market crash can occur at any time. This crash can wipe off the little profits you made and even liquidate thereby bouncing you off the market.
Also, never attempt to do revenge trading where you feel you might beat the market. For you not to be a victim of the wrong market, avoid doing revenge trading.
Continuous practice will fortify you as a trader. Some online crypto platforms have an option of a demo account which allows a user to have a virtual feel of how the market operates. Trading with a demo account can develop you more. With a demo account, you can make mistakes and learn from the mistakes before entering the real market with your funds.
As an experienced trader, you might notice one or two strategies that you might want to apply in the market. Using a demo account gives you the opportunity to test out a strategy to see if it will favour you or not. So always practice so as to become perfect. Additionally, you can make use of educational trading materials to improve yourself and your trade.
Always be Consistent
Consistency is the only way to perfect a trade. When you trade once in a long while, you might end up becoming rusty and then lose your grill. Constantly trading but at the same time, being wise in how you trade will only improve you. When you get a style that works for you, always be consistent and avoid distractions.
Note, what works for your friend might be dangerous to you. So if your friend is raking up big profits from his style of trade, don’t be tempted to leave your style for his. You might end up depleting your portfolio. Rather, remain true to your style and constantly practice or trade.
These tips are very important especially when considering crypto trading. However, try and develop some crypto trading strategy that suits your style. Some crypto trading strategies include the following;
- Moving Average Crossovers: This involves the combination of different price points of some financial instruments over a timeline and dividing the data points to ensure a single trend line.
- Relative Strength Index: This is a technical indicator that identifies momentum, oversold markets and overbought markets.
- Scalping: This is a method of opening trades in a market line while entering and exiting the market frequently as the market develops.
- Dollar Cost Averaging: This strategy does not involve indicators, unlike the others. It is generally suitable for new traders and expert traders.
These few strategies can be very instrumental to your success as a crypto trader if you carefully study them and choose the one that fits you and your trading style.