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Five Rules Of Crypto Trading

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Five Rules Of Crypto Trading

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Last Updated on by Noni May

Cryptocurrency trading is the practice of speculating on cryptocurrency price movements via spread betting or CFD trading account, or buying and selling the underlying coins via an exchange. If you know what you’re doing, crypto trading can be a good way to earn some extra money. Always be careful when investing, and make sure you’re confident in the results before trying it. 

Only invest what you can lose

Hobby investors can easily get burned by market crashes. This makes the most important rule of crypto trading, or any trading, to be to only invest what you can afford to lose. As soon as you convert your money into cryptocurrency, consider it lost. There is no guarantee that you will make that money back. Losses can come from dips in the market, or from more extraordinary problems like hacks, bugs, or even government regulation. Protect yourself by only investing what you can live without. 

Always pay attention to Bitcoin

Cryptocurrencies other than Bitcoin are known as altcoins, and their value is connected very closely to Bitcoin. If Bitcoin prices rise dramatically, altcoin prices will drop as people try to sell their altcoins in order to buy into Bitcoin. If Bitcoin prices drop, then altcoin prices can drop too as people transfer cryptocurrency back into the traditional tender. The best times for altcoin is when Bitcoin is static or is growing or declining organically. Use a trading desk to stay informed. 

Diversify your portfolio

The potential to earn more is increased with the amount of money that you invest in one coin. However, the potential to lose more is also increased when you do this. Look at the market of cryptocurrency as a whole. If the market keeps growing, it won’t be with only one coin, but more likely with the success of several. Diversify in order to best reap the benefits of overall growth from multiple coins. 

Don’t be greedy

As a coin begins to grow, our inner greed can make it harder to cash out while we’re ahead. You want to hold on in case it grows more. If you’ve made a profit, take it, even if only part of it. Nobody ever lost money by taking a profit. If you wait too long or try to get out at a higher point, you could risk losing the profit you have already earned or could turn that profit into a loss. Take profits and scour for reentry instead. 

Don’t invest blindly

There are people who are very unscrupulous and looking to take advantage of naive investors. These people will tell you what to buy in order to increase the prices so they can exit. Cryptocurrency is a very speculative market so a good investor should always do their own research so you can take full responsibility for the outcome. Information given by another investor, even one with good intentions, is never a promise and could lead to you being burned. Always take advice with a pinch of salt, and do your own homework before investing. 

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