So you want to trade cryptocurrencies?
These are a few issues you should not forget about when you start trading cryptocurrencies.
1. Make a trading plan
Many people inspired by breaking news about a surge in Bitcoin rush into trading without devising a strategy or setting clear goals. Investing your money in cryptocurrencies is like buying a lottery ticket, the only difference is that it is much more costly.
When you trade, you should have an exit plan, where you book your profit and move on. One of the most efficient strategies is to sell in stages, which allows you to have a chance to ride the surge higher.
2. Explore various projects
If you had to choose a mantra to repeat before taking any action in cryptocurrency trading, that would be DYOR – Do Your Own Research. You need to understand what a coin does, how the price moves, what stage the development is at and so on.
Many people make decisions only on the basis of information they found in blogs, Twitter, YouTube and other online channels without even trying to think of Plan B. There is no shortage of ‘shilling’ (promoting coins and market moves for personal gain) on the internet, but if you blindly believe everyone, you are sure to lose your money. Many of these shills are paid promoters or members of pump and dump groups that create fake hype to make people buy what they are selling.
3. Do not forget about security
Forgetting about security is not only one of the most frequent mistakes, it is the most fatal one as well. Leaving all your tokens at the custody of the exchange means you may easily lose them in case of a hacker attack or a sudden termination of activities. Remember that your cryptocurrencies are in fact not really yours until you become the only holder of the private keys.
Also, lots of traders forget about such elementary measures as making a physical copy of your password (putting it on paper) and using the two-factor authentication. There is no such thing as too much safety for cryptocurrency trading.
4. Diversify your portfolio
Even if you find a good entry, do not spend all your trading money in one go, wait and see whether this entry works. If the coin drops, you will be able to buy more at the dip, while if it moves up, you can always buy more. This strategy prevents you from being all-in on a trade that goes south.
5. Cheap is not always better
The coin price is not always an indicator of profitability. Try to find out why the coin is cheap and if there are any developments that can boost its price.
6. Make sure the exchange wallet matches the token!
This is one of the most frequently made technical mistakes, but it is easy to avoid. The exchange wallet you are sending funds to must match the token you are sending, otherwise you will lose your coins.
Enjoy your trading!