Cryptocurrency Trading - Tips and Tricks

Do you wish to make some great money by trading cryptocurrency? Come, let us learn some cryptocurrency trading tips and tricks.

The popularity and the growth of Blockchain technology and its successful` usage in the development of cryptocurrency have caught the eye of the traders and as well as investors who are constantly in the lookout for ways to multiply their investment. However, there are no shortcuts to gain profits.

Professional traders and investors always deliver some vague advice and recommendations to novices and often lead them into thinking that money multiplies overnight. They say random things like buying when prices are low, selling when it turns high and other general advice that you can pick up anywhere, either from online or from any business magazine. However, these recommendations and advice are more general and have almost no practical applications.

Cryptocurrency is bought and sold on platforms called cryptocurrency exchanges.  These exchanges charge a minor commission for every trade that occurs through them. They also give out advice and recommendations based on the current prices of the coins. Some exchanges have troll boxes wherein expert traders give out predictions and advice on the trading patterns. This advice might seem genuine, but as beginners, it is advisable that not to depend upon them entirely. Anyone can own their own Cryptocurrency Exchange Platform online with various service providers.

In this blog, we have collected some useful aspects of trading cryptocurrency that may prove useful for trading cryptocurrency on your own on a daily basis. There cryptocurrency trading tips and tricks can set you on the right path if you want to start a career in cryptocurrency trading.

#Tip 1: Do not invest all the capital in a single asset 

Most of the beginners invest all their funds in a single asset if they feel it is growing tremendously. This is a very reasonable strategy and you will get rewards as the price grows. However, very experienced and professional traders recommend that it is always better to share funds among exchange and cold wallet. This approach helps to mitigate all kinds of risks especially hacker attacks and any kind of dishonesty from the exchange managers.  

In addition to that, if you invest your funds partially and in diverse assets, you minimize your trading risks as well. If a cryptocurrency price goes up and you purchase it, you will be able to gain more returns. However, if you go wrong in predicting the price fluctuations, the asset will go down and you will lose your money.

Another reason to have a reserve is diversification. When you invest all your funds in a single crypto coin, you find be constrained to just that coin and will not be able to invest in other crypto coins. 

So the key is to distribute your funds wisely in multiple assets. It is better to use only up to three percent or a maximum of five percent of your total investment to buy a single cryptocurrency initially. 

#Tip 2: Use funds that you can spare

Most often, we find that traders who have just begun trading and entered this industry very recently often misjudge the charts and make crucial mistakes. They think that they would turn millionaires in just a couple of days. Without having enough money for trading, they will start sourcing funds from everywhere, including banks.

This is an extremely wrong way and can lead to complete bankruptcy. Imagine that you incur losses and lose money and that money is borrowed from the bank. You will have to work extra hard in order to repay the loan including the rates. The safer way is to reinvest your profits by parts or to use your savings for trading.

And this is why we strongly recommend that you invest only what you can afford. There is a bit of psychological reason for saying so. When you use your own hard earned money for investment, you will not be prone to emotions that can ruin your bank deposit. If the fears of losing all money keep nagging you,  it will affect your trading results in a negative manner.

#Tip 3: Be mentally prepared to face losses during investments

This might sound a bit weird since you invest money to gain more and not lose out your investment. However, all professional traders are willing to lose their investments. They are aware of the nature of the financial markets.  When you place your cards on the table and do a trade, you have no guarantee that it will be a profitable one. Moreover, even if you use a very strong strategy, you cannot eliminate the chances of losses.  

When you begin your career as a trader, your main task should be to have stable growth in your trading account in the long term. This stable growth should be possible even in the mid-term.  However, in spite of taking all the precautions, you have to be prepared to lose a dime at times in order to gain a  fortune. This is one of the main reasons why it is recommended to use a small part of your funds in a single trade.

In contrast to stock markets and forex, cryptocurrency industry has to deal with more risks for traders and investors. These include scam exchanges, hacker attacks, delisting of tokens and the others. Cryptocurrency market is highly volatile and coins have no underlying value. This means that they may cost either $100,000 or $0 depending on demand and supply. Nobody can predict what the price of the  Bitcoin and other altcoins will be in a span of ten years from now.

Certain fundamental factors also matter in such scenarios. Depending on the general perception of the public towards crypto industry and the attitude towards some specific coins in certain countries, their price may vary significantly.

Tip 4: Diversification of investments is the key

 

Have you heard of the advice of not to keep all eggs in one basket? The same principle applies to cryptocurrency trading.  If you invest all your money in a single asset, you are at a greater risk of losing money. 

We shall illustrate this with an example.  We shall assume that the price of X coin is $1,000. You decide to invest $10000 and buy 10 units. Unfortunately, one month later, the price of X coin falls down to $500. This means that you lose half of your funds as 10 coins cost $5,000 already. So, what is the mistake that you did here that cost you $5000?

There were also other coins like  Y and Z coins and you had the opportunity to invest your funds among them. Let’s assume that those two crypto tokens have added $500 each for the same period of one month. From this example, we can say that you had a chance to not only protect your risks but even to make some profit.

By diversification in crypto industry, we not only mean to just buy different coins. As you are already aware, there are scam exchanges, hacker attacks etc. When you invest all your money into a single trading place, your risks of hacking and scams are higher. If hackers steal your money, you risk losing all your money in just a single step. 

Some crypto enthusiasts store their funds in one type of wallet (cold or hot). The cold wallet offers more security but is less flexible while the hot wallet offers more flexibility while compromising on the security.  If you want a reliable solution, you can store some token in both the types of wallets and benefit from their advantages. 

Let us see a very simple example. You have one Bitcoin and want to store it somewhere, but you need around 10 percent from this amount to be instantly available to conduct transactions. A feasible solution, in this case, is to store 10 percent of your total amount using a hot wallet and the other 90 percent on your cold wallet offline.

#Tip 5: Use special techniques to analyse coins

 

Professional traders often give out this advice to buy coins when the prices are low and sell them when the price is high. Well, this is the most logical way of looking at the cryptocurrency trading. And, this might sound very easy. But once you start trading, you will face some difficulties to find the so-called market tops and bottoms. 

There are several ways to find the tops and bottoms using technical analysis.  

Why is the importance of doing this? When we go shopping, we always seek to find the best prices by looking for discount programs, bonus campaigns and other ways to minimize our expenses. When dealing with cryptocurrency trading, you do not have to compare prices in different places as the cost is already on the charts. All you need to do is have an idea whether that particular price is suitable for you or not.

Let’s say for instance that a trader has bought Bitcoin for around $20,000 in December last year. The current price of this bitcoin is around $7,000-$8,000. It is quite evident that he has made a mistake in purchasing Bitcoin while it is at its tops.  

Why do most of the beginners make those mistakes? The main reason for this is the lack of knowledge and some typical emotions that make them buy the tokens when the price grows.

Most of the traders buy the tokens when they see that the price is going upwards. This is a most common mistake since they skip the analysis procedure before going in for the trading. 

#Tip 6: Don’t follow the herd

 

Most beginners in cryptocurrency trading use trollbox or other trader recommendations to buy or sell cryptocurrency. 

So, what is the trollbox? This is a chat box that you will find on most exchanges. Experienced traders share their opinions in these chat boxes in such cryptocurrency exchanges.  However, successful traders share from their experience that they never follow the crowd. They devise their own strategy and are successful in gaining profits with it. 

There are several certain indicators that demonstrate the moods of the market players. Do stay away from them as these tools are quite useless. They give no market picture at all and even mislead those who go through them.

#Tip 7: Always invest in liquid cryptos

 

Most of the professional investors and advisers put out this advice to most of the beginners that they should use most of their funds to buy Bitcoin. This seems to be the obvious choice as Bitcoin is the first Blockchain supported cryptocurrency ever. This is quite a valid reason, but this is not the only reason. BTC is the most liquid crypto as its capitalization is $131,544 068 350 at the moment, as per the internet sources.

Why should you choose the most liquid assets to buy? The first reason is that they are less volatile and more stable as compared to other coins. If we compare EUR/USD and BTC/USD for example, the former is more liquid and is less volatile as well.

However, Bitcoin is the most liquid crypto coin these days and this is the main reason why professional traders use it to do their speculations.

The second reason to buy the more liquid coins is that there are lesser risks of scams. When you purchase Bitcoin,  you are sure that you will be able to sell it to somebody sometime later. However, when you buy a certain coin, which is not as liquid and as popular as Bitcoin is, your risks are higher as everything depends on the project in this case, its team, goals, roadmap, background etc.

#Tip 8: Employ various timeframes

 

When you are trading a particular coin, it is always wise to choose more than one timeframe to analyze its nature. Those traders who stick to just one chart are risking their opportunities and limiting them to just that. Even if you work with Hourly time frame, you need to use daily one or even a weekly one to see the whole picture of the market

Why is it important to do it this way? The main advantage is that you can gain a very general view of the market. This helps you to understand midterm and long-term tendencies. For instance, if you see that the BTC/USD price is going upwards on the Daily chart, you can definitely predict that this asset has a general uptrend in the midterm.

This will help you to get better trading opportunities on the hourly chart. When there is an upside trend on the charts, you can opt to work along the trend or trade against it. However, if you are opting for the second case you need to be careful as corrections to the general trend are always limited in time.  

Higher time frames also help you to find stronger support and resistance areas. This would help you to use them on your working chart.

#Tip 9: Buy rumors but only  sell facts

 

This is a typical recommendation that is coming from stock and Forex markets. There is a great probability that a strong and significant price wave is underway when rumors appear. Those who buy on these rumors have greater risks as there are still no facts to prove them right. However, they also have better opportunities to make profits as these trends are in their initial phases when such rumors appear.

As a beginner in cryptocurrency trading, it is important to understand that this recommendation is extremely conditional as rumors may either be positive or negative. This means that the price will probably grow or fall depending on the type of rumor that is doing the rounds. If they are negative, one of the impromptu decision is to sell an asset or at least a part of it since not all those rumors may have an impact on price fluctuations.

Now. let us see why is it necessary to use rumors in your trading routine.  They may have a significant impact on price fluctuations.  These are stronger than the impact of the news following those rumors.  

How does this work?

Let’s say for example that you have heard that the price of a particular model of a car will rise in one month. This information is not confirmed yet from authentic sources, but you want to buy a car already, especially since you had this intention before. The other two would have the same wish as they will have to pay more after car’s price inflates. This will lead to the growth in prices of the car as demand will rise as compared to supply.

Now let’s take another example. You have bought a car a while back and want to sell it. You have heard somebody saying that vehicles’ price is likely to go down in a couple of months. This means that you need to hurry up in order to get rid of your car for a better price.

The same logic applies for the crypto industry as well as any other market in the world. When you read rumors related to positive changes for the crypto coins, you should buy coins as those changes may affect cryptocurrencies price in future. In case if rumors are negative, you should sell those as future events are likely to push the price down. This is the most cardinal rule that applies to cryptocurrency trading.

#Tip 10: Always be willing to learn

 

Most beginners in the cryptocurrency trading are of the belief that it is okay to stop learning about the cryptocurrency market and the trends once they have gained some knowledge on how to navigate the day to day trading. The fact is that there is no edge in learning that anyone can reach. Studying the market and the trends in trading is an eternal process. Well, this is applicable everywhere, but most important so in cryptocurrency trading.

Once you have created your own trading strategy or has taken up a readymade one, you can start trading already. Once you have started trading, it doesn’t imply that you can relax right there and the profit will find its way into your pocket with no difficulties.

Markets are changing every single minute. You will want to be vigilant and need to monitor those changes and include them in your trading strategy. It is good to learn about more trading methods, be aware of what’s happening in the crypto industry and always be on guards so that you don't lose money.

Conclusion

We have sourced the tips mentioned in this blog from various sources on the internet. All the tips and tricks for crypto trading given here are tried and tested and have proved to be successful for beginners around the world. You can certainly use them and follow them in order to improve your trading results.  Another thing to remember is that we all make mistakes while doing cryptocurrency trading. Even the most professional and expert ones do. The key is to realize the mistakes and move on. Good traders acknowledge their mistakes, and most importantly, analyze and learn from the mistakes, thus they improve their skills constantly for understanding the market. 

You should also make sure that you don’t buy a crypto coin just because everyone else is buying or that it is the new ‘in’. You should be genuinely interested in cryptocurrency and be willing to spend the time and energy to understand the market and its functioning before you put your feet in the cold waters.

So which category do you fall in? What kind of a trader are you? Have you used any of the above-mentioned tips and tricks to have a foothold in the market and earn some money? 

Let us know in the comments section below, and you are most welcome to share your own tips and tricks to succeed in cryptocurrency trading.

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