As we all know cryptocurrencies are extremely volatile. From one hand crypto market can make you rich rather quickly. But from another hand its volatility provokes significant risks. Here we collected the main tips which will help you to make your trading safe and profitable.
- Never invest what you are not ready to lose
Crypto trading could be extremely exciting but unfortunately there is no guarantee that you will not get a loss. That’s why it makes sense to invest only the money which you are psychologically ready to lose. There is no reason to use credit cards or to apply for extra loans for the sake of trading.
- Always pay attention to Bitcoin.
Most altcoins (every cryptocurrency except Bitcoin) are pegged more closely to Bitcoin than Asian currencies were to the USD during the Asian Financial Crisis. If Bitcoin price falls dramatically then it’s quite probably that the prices of the other altcoins will follow this trend and will fall down as well. And on the contrary when Bitcoin is stable enough or when it’s growing step by step it’s the best time for the other altcoins to grow in price.
- Diversify your investments
Trading is scalable. The more money you invest the more profit you can get. But another way to think about it is that at the same time the amount of potential loss is growing as well. What are the chances that this market cap increase will be entirely driven by one coin vs. being driven by many coins? The best way to safely capture the overall growth of cryptocurrency is to diversify and reap the benefits of growth from multiple coins. In another words it’s always better to diversify your investments instead of putting all your eggs in one basket.
- Don’t wait too long to take your money
Normal graph of the most of cryptocurrencies is a sinewave. It means that after the certain altcoin achieves its top point it always goes down in price. So there is no reason to wait too long and to hope that you can win even more money then you’ve already got. Sometimes it’s more reasonable to stop and to take your money while they are on the table.
- Invest in those projects which you understand
Unfortunately less-informed investors used to become a source of income for people who play in the cryptocurrency Market. That’s why it always makes sense to do your own research before investing. The information which you get from other investors could be great but it’s always better to remember that this information is neither profit nor guarantee.
- FOMO is not the best motivation
FOMO means “Fear Of Missing Out “. The bright example of FOMO effect is the situation when a certain coin is currently being pumped and reaches dizzying heights. We know that it’s generally too late to get in already but we invest in this coin anyway motivated by some irrational hope. That’s FOMO scenario which one definitely should avoid while trading.
- Be strategic and categorize your investments
Don’t forget that projects you invest in should be divided into different categories depending on the time which you’re going to wait before selling. If you believe some ICOs have good teams, great vision, amazing publicity and a track record for successful execution than you can categorize them as medium or long-term holds and let them marinate into a delicious tenderloin. When the price dips, don’t even consider panic selling because anything in your medium or long-term portfolio should remain untouched for a set amount of time.
- Always learn from your mistakes
If you got a loss always remember that it’s not only a loss but also experience that you can use in future. It always makes sense to analyze the situation and to figure out the main mistakes by which the loss was caused. No one is perfect and everybody can make mistakes especially at the beginning of trading. Don’t let the losses discourage you, because the reality is they’re making you better trader if you choose to learn from them.
As a conclusion it should be said that the tips we discussed in this guideline are neither rules nor instructions. Cryptocurrency market could be quite irrational and unpredictable and everybody invests at his own risk.