Winning Rules when Trading in Cryptocurrency
A quick peep into what the crypto trading rules imply
The popularity of cryptocurrency continues to be contagious. Skeptics never hold back poking holes on the viability of cryptocurrency and mudslinging the hope that it may become the currency of modernity. On the other side is an uncompromising team of people who have experienced crypto great potential and those who look at it as an unmatched progress so far. Whichever the side you choose to belong, learning a few unwritten yet winning rules about crypto trading isn’t a waste of time.
By saying rules, we don’t necessarily intend to pass a false impression that doing all the tricks mentioned is an obvious hack into crypto trading, no. People still miss it big by design. The only thing that these rules grantee is extra vigilance and increased possibility of cracking the often challenging juggernaut of crypto trading.
Cryptocurrency continues to be a hot topic as everyone is looking toward investing in it. However, every game has its rules, and cryptocurrency is not exempted. If you do not learn about the rules, you may lose. Thus, it is important to know the main rules for trading in cryptocurrency before making an investment decision.
1. Invest in Something You Understand
You can only be successful when you are investing in what you know. Even at the market, we do purchase what we know or believe can help us. Therefore, this is the same case for crypto. One has to first understand the technology that is behind the technology. Getting more information about it will help you make a decision on whether to go on with the investment or not. Cryptocurrency trading is a complicated market that may also require some training.
2. Know that there are Scams
Theft and scams in the crypto world are not new. There are some people who usually come up with some Ponzi scheme in the name of cryptocurrency. Therefore, before making any investment decision, you should do due diligence.
Moreover, currently, there is an increase in cryptocurrency interest. For a new investor, there is a rise in scams as well as stories linked to retail investors. These are the kind of investors who normally lose their coins due to shady deals. Therefore, you should beware while trading as there are scandals linked to wallet fraud and theft.
3. Utilize a stop loss when trading
Stop loss refers to the tool designed to limit the maximum loss of a trade. It does so by liquidating the assets after the market price is at a certain value. You will choose the type of stop-loss you may want to use, depending on the situation. All this depends on the condition of the market.
The different types of stop-loss include full, partial, as well as trailing stop loss. The full type, when triggered, liquidates all the crypto assets. However, this is good for a stable market that has sudden and unexpected fluctuations in the prices. As for the partial stop loss, when triggered, it liquidates a certain proportion of the digital assets. Lastly, for the trailing type, it adjusts depending on the fluctuations of the crypto asset’s price.
4. Only Invest an amount you are willing to lose
People have made mistakes in the past by taking loans to invest in cryptocurrency. However, that is a mistake and where the problem comes in. You should only invest part of your savings. It is like a gamble, and you may not be sure whether you will win or even lose.
The crypto market is volatile. In some cases, it may turn you from hero to zero and vice versa. Moreover, the fact that crypto is decentralized means that hacks or even government regulations may affect it. Therefore, you should not to take a loan for an investment that you are not sure whether it will be profitable.
5. Crypto Trading is a Win-Lose Situation
Crypto is like a see-saw. In some cases, you are up, and in some, you are down. Also, under straining situations, you may balance. During some situations, there is a balance due to strain. Therefore, crypto is a game of balance, and anything can happen at any time. Therefore, in crypto, each time, a trader can suffer a loss or even make a profit.
6. Do not buy on Margin
In the cases that you go to the margin, you may be forced to borrow money from a brokerage to increase the amount you need to purchase. It is leverage. It is also called a double-edged sword. When you are right, then you may be able to get substantial profit. Unfortunately, if you are wrong, then you will owe more than the invested amount. As a wise trader, you need to manage risk. This is only possible when you do not borrow money so that you can purchase crypto.
7. Cryptocurrency Trading is like a war
Crypto is traded by nations globally. Unfortunately, one cannot see the whole battlefield as many individuals are involved, and you may not see what is in the front. Therefore, it means that you will have to make decisions with just incomplete information.
Just like a war, in crypto, as a trader, you may be on the wrong side. There may be traders with so much crypto who can influence the course with a trade. Therefore, it is just the traders who know when they will make a trade. In some situations, crypto trading might not be sufficient. Thus, they may not get it right.
8. Take Profits in Intervals
As I said earlier, the crypto market is volatile. For instance, in a few hours, a coin may gain about 20 to 30%. During those times, an investor can be greedy and even hope that it will rise further. However, failing to redeem them during those intervals may make one miss the quick gains. Irrespective of the trading goal, greed cannot win.
9. Learn through Mistakes
In every new venture, every person commences as a newbie. It means that for us to be pros, we have to make some mistakes. Therefore, it means that daily, one has to analyse why a trade is unsuccessful and what is the way forward. Also, through that, one can know the measures that they can take net time in making it more profitable. Moreover, through learning, we do not have to repeat similar mistakes.