Every day, we hear headlines on numerous news platforms concerning cryptocurrencies like BTC price or other altcoins like RSR price, and the sector has been perplexed due to the recent market drop. Hence, it is essential to have accurate information before diving into cryptocurrency.
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In this article, we will discuss six smart tips that you know before beginning your crypto journey:
6 Tips You Must Know Before Begining Your Cyrpto Journey
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Have a reason for each investment decision
This may sound apparent, but you must have a valid reason for engaging in cryptocurrency trading. Whether you intend to day trade or scalp, you must have a reason to begin trading cryptocurrencies. Trading digital currency is a zero-sum game; you must understand that there is a loss for every success: Some succeed, and others fail.
The cryptocurrency industry is dominated by massive ‘whales,’ such as those who place market order books worth hundreds of Cryptocurrencies. And do you know what these whales are best at? They are patient; they wait for unsuspecting traders like us to commit a single error that would result in our money falling into their hands.
Whether you’re a scalper or a day trader, it is sometimes wiser not to gain anything on a particular trade than to push your route into losses. Based on our decades of market analysis, we can confidently state that you can only remain profitable by avoiding specific trades on some days or periods.
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Define profit targets and apply stop losses
Every trade we enter demands us to learn when to exit, regardless of whether we profit from cryptocurrency. Establishing a precise stop loss level can assist you in minimizing your losses; this is a rare ability among traders.
Establishing a stop loss is not an arbitrary decision, and possibly the essential thing to remember is that your sentiments should not influence you – the cost of your currency is an excellent place to set your stop loss.
For instance, if you purchased a currency for $1,000, designate it as the minimum price you are ready to swap. This will ensure that, should the worst occur, you can move away with your initial investment.
The same principle applies to profit rates; if you intend to exit the market once you reach a particular minimum profit, adhere to it. Greed is never the solution!
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Don’t Fall for FOMO
The acronym FOMO stands for fear of missing out. This is probably one of the most infamous reasons why many traders struggle in the market.
From the outside looking in, it is never a pleasant sight to witness people make huge profits from inflated coins within minutes. We can honestly state that expert traders despise such circumstances as much as you do.
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Nevertheless, one thing is for sure:
Be wary of the time when the green candles shout at you and urge you to jump in. At this time, the whales we stated before will be grinning as they watch you purchase the coins they bought previously at meager prices. Typically, what occurs next? These coins usually end up in the pockets of small traders. Then, the red candles appear due to an oversupply, and losses begin to trickle in.
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Therefore, a simple rule to go by is to avoid FOMO!
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Risk Management
Piglets consume a lot of food, whereas more giant pigs are consumed. This is especially true for cryptocurrency market profits. Wise traders never pursue enormous profits; they never do!
They’d rather sit tight and make little but consistent profits from periodic trades.
Think about investing less of your money in less liquid markets. Such large transactions demand significant patience, and the profit and stop-loss target levels will be further away from the purchase level.
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Underlying assets cause the volatility of the market.
Most altcoin pricing is dependent on Bitcoin’s current market value. It is crucial to recognize that Bitcoin is fragile relative to fiat currencies.
When Bitcoin’s value increases, altcoin values decrease, and vice versa.
The market is typically hazy when the Bitcoin price is erratic, which, as you can expect, precludes most traders from acquiring a clear grasp of market activity. At this time, we should have immediate goals for our trades or refrain from trading altogether.
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Diversify as Much as Possible!
Even seemingly safe investments can fail under specific economic conditions. Cryptocurrencies are more volatile.
You can generate thousands daily, but the inverse is also true. Digital asset investments might be lost instantly. Diversification is best for overcoming such uncertainty. As said, Bitcoin’s USD value affects all other coins. All currencies lose weight when BTC falls against the dollar, and vice versa. That shows that diversifying your coin holdings may not protect you against bullish marketplaces.
However, having a volatile base commodity like Bitcoin has issues, as you may have observed in the second quarter of 2018. Bitcoin made more individuals affluent faster than any investment ever. Billionaires were formed, but most people don’t realize that many went bankrupt. The currency increased its market valuation by over thirty times in the past year.
This implies that traders can keep Bitcoin as their primary asset. Still, they must also recognize the importance of the dollar. Diversify to reduce risk. Opt for mutual funds, real estate, equities, and other stable investments that are less risky than cryptos.