Cryptocurrency trading is not that easy to master because this particular instrument is more volatile than the rest. From sketchy ICOs to extreme volatility, there is no way to guarantee profits from this market. Yet, every other day, you come across news about people making it big due to crypto trading. This has prompted thousands of people to enter this market, but there are some dos and don’ts that you should know before you follow the same route. Following them can ensure that you don’t lose your entire investment and can actually earn the returns you want. Read on to find out what they are:
Do have a strategy
Sure, you have probably come across some wild success stories about people who invested in Bitcoin and other mainstream cryptocurrencies before 2017 and earned millions, but this is not a reliable way of making money in the crypto market. You have to have a trading strategy, whether it is complex or not, in order to enjoy good returns consistently.
Don’t be greedy
It is important to remember that the top enemy of every crypto investor is greed. Everyone has the capability of being a little too greedy every now and then, but you need to control it when it comes to the crypto market. Good margins and an effective strategy can turn into losses very quickly because of greed. One of the best ways to ensure it doesn’t control you is by setting and sticking to very clear entry and exit points.
Do use trading tool software
When you are trading in a market as complex as cryptocurrency, you cannot do it without any tools to help you out. There are tons of trading tools that can help you create and execute your strategies in a better way and also help you understand market shifts so you can predict future ones. There is a huge range of trading tools that can be found these days, but not all can be used for all kinds of trading. There are brokers, such as Xtrade, which provide their clients with different tools for different types of trading in order to help them. Some of them are very simple while others are quite advanced and use cutting-edge technology.
Don’t assume crypto is like other instruments
Another big mistake that lots of crypto traders tend to make is that they assume crypto to be like other trading instruments. This is common in traders who have traded other instruments and decide to follow the same patterns. But, you should remember that the crypto market is volatile, difficult to predict and extremely reactionary. It is also a fact that this market has the potential of offering outsized returns, something that you cannot get through traditional markets like stocks and foreign currencies.
Therefore, the strategies that work in the crypto are quite different and the more conservative strategies that people use in other markets are significantly less profitable in this volatile market. As the market is trending upwards consistently, you shouldn’t aim for an increase of a few percentage points.
Do manage risk
Managing the risks is a vital tenet that successful cryptocurrency traders always follow. Strategies focusing on safe investments relative to the volatility of the crypto market are an essential part of successful crypto trading. Here again, trading tools exist to help you in managing the risks. These risk management tools can be quite useful, but you should ensure that your chosen broker offers you these tools. For instance, check out Xtrade Review to see what tools it offers and whether risk management tools and strategies are included or not. Choose a broker that offers you these tools so you can minimize the risks.
Don’t follow the crowd
It is a fact that social sentiment has a big impact on cryptocurrency prices, which means that the opinion of the crowd does matter. But, just like other types of trading, the goal should only be to make as much money as possible, something that’s not possible in this way. It is advised by successful traders that when you are trading in the crypto market, you should listen to what the general people are saying. But, they have also added that you should be practical and remain skeptical and incorporate these movements into a more sophisticated strategy.
Along with following these dos and don’ts, you should always maintain a cool head when trading cryptocurrencies. A lot of traders are known to panic because of FOMO or other factors and this prompts them to make decisions that are not profitable in the long run. Traders should always keep up with the market news in order to know about the latest updates and research the cryptocurrencies they want to trade as they can determine their profits.