Last updated on August 26th, 2021 at 11:11 am
However, the opposite scenario can also hold true, where traders can lose a substantial amount of their investment in even less time than they gained it. Crypto trading is inherently filled with many risks, especially if you are not familiar with the world of cryptocurrency. For less seasoned investors, knowing certain tips and tricks based on advice gleaned from cryptocurrency experts will provide them with more confidence in the investment choices they should make in order to attempt to maximize their return on their investments, as well as to minimize losses.
Stay Up to Date on Market News
Knowing what is happening with respect to recent market performance and projections of the different cryptocurrencies such as Bitcoin, Ethereum, Ripple, Litecoin and other prospective cryptocurrency companies will help you to evaluate the risk for investing, whether to buy or sell coins or hold off on trading. Keeping up to date on news with companies, particularly as it relates to cryptocurrency, also allows you to determine what investment actions you should make.
Finding a good news source is therefore paramount in facilitating this process. For a nomad investor, and those who travel the world, this is especially important. There are a wide variety of people providing advice to the public. However, you should always ensure that they are qualified to give these opinions or better yet, stick to informing yourself with fact-based information. Moreover, reputable websites along with reliable news channels featuring reporters and writers with knowledge of economics and the cryptocurrency landscape likely would provide more credible information than social media posts from investors without any educational credentials.
Diversify your Crypto Trading Portfolio
Following the advice of not putting your eggs in one basket is sage advice for any crypto trader. Diversifying your cryptocurrency portfolio to include a variety of companies such as Bitcoin, Ripple, Litecoin, and Ethereum is the most prudent plan. Should volatility in trading occur with one company, your investments in other cryptocurrency companies should help to balance out your day-to-day risk that is incurred with investing in a single company and offset significant losses with any one company.
Enlisting the aid of a professional financial advisor for an established fee will facilitate the process involved in achieving your objectives with crypto trading. Your advisor can set up a portfolio based on your financial plan, as well as to assess your risk tolerance. When it comes to strategic investing, the best plan would be to not only diversify your cryptocurrency purchases, but to also incorporate investments from other sectors of the economy, including real estate, mutual funds, and stocks.
Simplifying Trading Transactions
Although it is possible to trade independently, the most common method of buying and selling cryptocurrency is to use an exchange platform. As with all other forms of investing, crypto trading has fees associated with buying and selling. Fees can vary up to 4%, depending on the exchange platform. Exchanges available to crypto traders number in the hundreds. However, investors should be wary that not all of them are regulated and trustworthy.
To determine which exchange platform to use, some considerations to take into account include your country of residence, your preferred form of payment, the cost of fees and your cash flow requirements. Examples of more popular exchanges to trade Bitcoin and Ethereum using only a debit card are Coinbase, GDAx and Bitfinex. The advantage of trading some cryptocurrencies such as bitcoin is the ability to buy and sell subunits of a whole coin, which means you can make smaller investments to enter the market.
Utilizing Different Digital Wallets
Once a trading transaction has been performed via an exchange platform, you will need a digital wallet to store the cryptocurrency. Hot wallets are online storage locations usually supplied free of charge by the exchange platform you subscribe to. They are easier for beginners to use and offer more flexibility. However, their security depends on the trustworthiness of your exchange provider. Because hot wallets are essentially online software, they are more easily hacked into. Cold wallets are offline storage locations where you can safely store your funds as well as your keys. They allow for transactions to occur, but are more cumbersome to perform. As well, there is a fee involved in using a cold wallet.
Avoiding Emotional Trading
Trades made on the basis of emotional decisions can often cost you profits. Setting target profits and stop loss values without straying from them, is advisable, as is avoidance of panic buying when values soar. Impulse buying when market prices are low is a draw for beginner traders. However, they might not realize that prices are also dependent on the number of outstanding market shares of the cryptocurrency that are available to be sold.
If you are a beginner trader, another recommendation is for you to first utilize a demo account for a period of time to test out the waters of crypto trading. Taking this one extra step before performing your actual trading activities will help you assess the marketplace performance of your chosen investments, as well as familiarize you with the trading process.
Taking some preliminary steps to increase your knowledge base, preparing a plan of action and setting up accounts for your trading operations are important steps to perform, before you take the leap into carrying out your actual interactions. By preparing yourself in a systematic and objective manner, along with following some of these tips and tricks, crypto trading can yield better results and be a more enjoyable experience.