Cryptocurrencies have become useful investment assets for traders. The digital assets have witnessed massive growth since the inception of Bitcoin in 2008. Today, cryptocurrencies remain the most traded assets on financial markets and are yet to grow in following. The current bull run which has seen Bitcoin gain more than 70% this year, has also resulted in mainstream adoption of cryptocurrencies among the general public. Which so far, is considering having a fraction of their investment portfolio as cryptocurrencies. Let’s have a look at the useful tips for beginners on how to start trading cryptocurrencies.
Choose a Suitable Trading Pair (or pairs)
Choosing the right cryptocurrency trading pair is the most important thing when starting out. Some trading pairs have the potential to make more profits than others. No one wants a pair that will make them lose their investment. Take the following steps so as to make an informed decision when choosing a trading pair:
- Identify the major trend
- Pair the trend (or performance direction) with your trading strategy
- Identify and note the major Average True Range (or ATR)
Before taking the following steps you also need to figure out your trading strategy.You can figure out one of your own designs. Better yet, you can work out one with the help of a professional and experienced trader. This is also the time to decide whether you want to engage in copy trading – where you use the signals of other experienced traders to make your own trades.
Differentiate Between Fundamental and Technical Analysis
The best way to figure out a working trading strategy is to understand both fundamental and technical analysis. Fundamental analyst refers to assessing the valuation of an asset using economic and financial factors. On the other hand, technical analysis is determining future price action using past(historic) price action. Both methods are good for determining the value of an asset and how it will perform in the short or long term. It turns out there are traders who use both analysis methods when trading so as to make the most out of their activities. Such traders are called confluence traders. Their underlying belief is that a combined strategy holds more potential of making profit than a single strategy.
Have a Definite Trading Motive
While profits are a key driver when trading, remember this is a zero-sum game. For each single win, the market reacts with a corresponding loss. You win, someone loses, you lose, someone wins. The biggest mistake newbie traders make is revening losses. Lack of patience also makes them fail because in trading, long term shots are the best way to earn profit from trading. But a trader is fated to lose if they lack enough patience to hold on to their trades. Most experienced traders are big whales waiting for small mistakes by newbies like you so they cash out massively. You will always make losses, and you will also make profit. Avoid rush decisions, always think about the outcome and be prepared to go without gains for long periods of time. The only way to remain this particular is having an informed trading motive before setting out.
Start out Small
Proceed in trading with caution and begin with a small investment. A suitable investment is a fraction (mostly a third) of your trading capital. Note cryptocurrencies are extremely volatile and the risks involved are high. Opt for small takes , be patient and put in place an effective risk management plan. Also avoid trading with more than you can afford. Because this makes the losses extremely perilous for your cryptocurrency journey. Customize and set stop losses whether the trend will make profit or not. Effective stop losses enables a trader to cut down on losses. Note how to set stop losses is a valuable and very rare skill for traders.And you need to learn it as soon as you can.
Avoid the Fear of Missing Out (or FOMO)
Beware of the green candle sticks signalling you to jump into a trade because you have seen traders pumping in profits in a matter of minutes.
FOMO is the step by step guide to failing as a cryptocurrency trader.
Remember crypto has high volatility and mostly you will see an uptrend that would make you easily cash in with the hope of taking a share of the pie.
This is the moment the big whales will be laughing, as they see you buy the coins they previously bought at lower prices. Precisely, the trendline will cross the oversupply line into bearish territory and the next thing; losses. Well avoid FOMO as much as you can.
Learn How to Manage your Risks
When trading cryptocurrencies, customize a nice risk management plan. FOMO teaches you the hard way on how to avoid running in the direction of big profits. Therefore, your risk management plan should accommodate small but sure trading strategies. Remain consistent and ensure most of your investment portfolio lies within a highly liquid market. Research the market and be strict with your profit take and stop loss. Before opening any position, consider the amount of profit you will make and be satisfied with all the trades you make. Draw out what losses you can afford right from the beginning and don’t rush into opening positions.
Choose a good Trading platform
Finally, consider choosing a good trading platform after learning the ins and outs of digital asset trading as a newbie. Put the following factors into consideration when choosing the right trading platform; reliability, security of your funds, transparency, profitability and user-friendliness. Bitcoin Revolution is a reliable platform that connects users to top underlying brokers who execute trades for them. The brokers handle all the transactions on the platform and provide the necessary assistance to account holders.