If you are just getting into crypto trading, you probably already know it’s more than just tracking the price of Bitcoin. The trading process can be quite tricky, as there are lots of market factors that you need to consider, in addition to the inherent volatility of crypto. This means that as a beginner, you’ll need to operate wisely to ensure you are not left burning.
Below are six rules to abide by when getting started.
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Conduct Thorough Research
If you walk in blindly, you’ll most likely walk out without your money. To be successful, be prepared to invest hours and days into your research. For a start, ensure you have a good understanding of cryptocurrencies in general – the options, how they work, the technology behind them, the key players, etc. From there, you can study market trends and familiarize yourself with different trading strategies.
That’s all not though, as you will still need to have a clear understanding of every project you want to invest in. Ensure you look at its uniqueness, team members, partnerships, and overall market sentiment.
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Keep an Eye on the Market
Crypto prices shift quickly, and as such, you have to keep an eye on the market at all times. This means being keen on the news, trends, and events, as these usually have a significant impact on the crypto market. You can combine this with information from reliable market analysis tools and resources. This way, you will be able to react right away to any changes, maximizing opportunities and minimizing losses.
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Diversify, but Stick to Major Assets
To reduce risk, it will be wise not to put your proverbial eggs into one basket. And besides risk, it will also help you capitalize on a different asset, potentially increasing profit. However, you will come across new projects and coins every other day, but it’s important to avoid these as a beginner. Most of these come with promises of huge gains, but they can lead to quick losses. It’s advisable you stick to major assets that have been proven by the test of time, such as Bitcoin and Ethereum, as you are just learning the trade. There are also several others that can be considered relatively stable but ensure you balance between diversification and sticking to major assets.
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Keep your Emotions under Control
It’s easy to get lost in your emotions when you are making either a good profit or a bad loss, especially when you combine this with the volatility of crypto. For a start, don’t be greedy. Greed can quickly turn a profit into a loss, and you can’t lose money when taking a profit. Greed can also materialize in the form of Fear of Missing Out (FOMO), where the desire for quick profits can tempt you to chase after every promising coin or jump into trades without conducting proper research. At the same time, be rational enough to pull out of losses unless it is a long-term investment.
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Use Stop Loss
One of the tools that will help you avoid big losses is a stop-loss order, as it can automatically stop a trade when it reaches a certain loss point. However, you will have to draw a line between stopping your trade prematurely and making huge losses as crypto shifts quickly. Note that stop loss can also be used to lock in profits when a trade goes up. It also doesn’t have to be a “hard” stop, as a mental one, based on a time of day or day of the week, can work just fine.
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Trade What You Can Lose
All trading is risky, but the volatility of crypto makes this type of trading even harder. As such, it’s wise to only trade with what you can afford to lose. Operating this way can help you avoid getting into a bad financial situation, and it’s also a good way of minimizing emotions in your trade.