Every day, you will come across news and reports about one platform or the other related to the crypto market. There has been a lot of hype surrounding it, especially recently, as cryptocurrencies have emerged as winners in the global pandemic. Those who were smart enough to enter the market at the right time have made solid profits and others are eager to follow their path. In order to be able to do that, you need to know some easy tricks that can help you in honing your crypto trading skills. What are they? Check them out below:
- Have a goal before entering a trade
You need to have a clear goal before you enter a crypto trade on one of cryptocurrency exchanges. Trading these cryptocurrencies is a zero-sum game, which means for someone to profit, others have to make a loss. If you don’t have a goal in mind, you might end up getting manipulated by crypto ‘whales’, who are large investors and are waiting for other small traders to make mistakes so they can take advantage.
- Set profit targets and use stop-losses
Every time you enter a trade, you need to set how much profits you expect to make from it and stop-loss, which refers to the amount of losses you can accept from the trade. The former can help you in maximizing your winnings without getting too greedy whereas the latter is useful because it allows you to cut your losses. When you have these limits in place, you will not be carried away by your emotions.
- Beware of FOMO
The fear of missing out (FOMO) is very real in the cryptocurrency market. In fact, it is what pushes people into crypto trading in the first place, but you have to learn to manage it if you don’t want to be used by people for making a profit. The whales will often pump up a coin in order to convince people that they should invest in it as it is rising in price. Small and new traders will end up buying this cryptocurrency and the next thing you know, the price goes way down and your losses start trickling in. When a crypto is already on the rise, you should steer clear of it and not let FOMO scare you. Staying tuned to some reliable crypto news will be helpful in this regard.
- Don’t buy just because of low price
One of the most common mistakes that beginners make is that they buy a crypto because its price seems to be on the low side and more affordable for them. But, you should bear in mind that when you want to trade cryptocurrencies, your decision to invest in one should not be based on affordability. You need to think about its potential, market cap and other factors before deciding to trade it. Otherwise, you will not see the action you are looking for.
- A tip about ICOs and crowd-sales
The purpose of ICOs (Initial Coin Offerings) is to offer the public an early chance to invest in a startup via a crowded sale. Investors receive tokens are a reduced price with the promise of being able to sell them at a much higher price when they are eventually listed on an exchange. While there have been some successful ICOs and traders have made profits, there are also plenty of stories about ICOs that turned out to be complete scams. Therefore, you have to be cautious when you are thinking of investing in one and pay close attention to the details.
- Don’t forget to diversify
All kinds of investments are unpredictable and you never know what might happen. This is particularly true for the very volatile crypto market, so the best way to manage the risks is to diversify. Rather than putting all your investment in one cryptocurrency, spread it out in several others, especially those that have a different underlying technology, so if one goes down, the other goes up and you can still profit.