Do you follow some crypto trading rules? If you don’t have any, you should use these five golden rules for successful trading.
Crypto trading isn’t about getting lucky a few times. If you want to find success with trading cryptocurrencies, you must base your good results on fundamentals, good habits, and experience. Making money as a crypto trader requires some discipline, and that means following some trading rules.
1. Invest Only What You Can Afford to Lose
Like with any other type of investment, crypto trading is a risky business. And sometimes traders take a loss even if they did everything “right.”
Take the recent crash in January 2018, also known as the Bitcoin Crash and the Great Crypto Crash, for example. After an unprecedented boom in the precedent year, in 2018, the price of Bitcoin fell by nearly 65% in the first month of the year. The results? Broken monitors, smashed laptops, and the most massive monetary losses ever suffered by the traders on that market. So, markets like the crypto market are unpredictable sometimes. That’s why this is perhaps the most essential rule in crypto trading: don’t invest more than you afford to lose!
Whenever you are trading, there’s no 100% guarantee that you’ll get your money back. Loses don’t just come from other investors’ better strategies but can also be caused by extraordinary factors, such as hacks, bugs, or even government regulations.
So, before every investment you make, take a step back, and re-evaluate your current financial situation. If you can’t afford to invest at all, don’t take any desperate decision such as using a credit card, taking out a mortgage, or applying for loans. Simply wait for the moment when your financial situation allows you to invest.
2. Diversify Your Investments
One golden rule that all pro investors know is that you should never put all your eggs in one basket when it comes to investing.
Although you have a greater potential to get a more substantial amount of money when you invest in a single coin, the risk of losing more money is equally magnified, if not bigger. So, the smart thing to do to avoid losing a lot of money if a particular coin takes a hit is diversifying your investments and investing in different currencies.
Let us give you an example to help you understand the importance of diversifying your investments. Between January 2016 and January 2018, different coins enjoyed different levels of success. While Corgicoin has increased by 60,000 times, Verge currency increased by 13,000 times. However, Bitcoin only increased by 34 times. So, if you had invested in Bitcoin, this would have gotten you impressive gains, but investing in other coins too would have helped you gain potentially more significant amounts of money.
3. Choose a Reliable Broker
Choosing the best crypto trading Forex broker is a battle half won. Hundreds of online brokers offer crypto and Forex trading options. By no means, however, should you choose the first broker you find online.
The best broker is reliable and genuine. Keep in mind that your money will be at stake, so you’d want to know that you can trust your broker with them. Also, make sure that your broker is regulated. This is the best way to know that they are reliable and checked. Regulated brokers also offer the best digital security measures, best execution prices, and excellent customer support if or when you need it. Another crucial thing you should look for in a broker, mainly if you are a beginner, are demo accounts and learning resources on how to trade cryptocurrency.
So how do you choose the best crypto broker from such a large pool of online brokers? The best way to find a reliable broker is to do your research. Look online and find everything you can about that broker, including reviews and recommendations from other more experienced traders. If you find anything that seems sketchy, don’t choose that broker because you might sign yourself up for a bad trading experience that will make you lose a lot of money.
4. Avoid FOMO At All Costs
FOMO is the weak spot in investing that makes investors lose money most frequently. It only takes a bit of media hype, a few opinions from investment “experts,” and a little bit of insecurity from your part to make you make a wrong decision. In fact, the same recipe is what made Bitcoin prices rise from $10,000 to $20,000 in December 2018. Now, investors may look back and think that if they had waited one more month, they could have bought the cryptocurrency at $9,000 instead of waiting until the coin hit $20,000 again.
This is often a mix of greediness, investing blindly, and FOMO.
Never heard of FOMO before? You should get familiar with the term because, as an investor, you’ll have to fight it off all the time. FOMO stands for Fear of Missing Out. So, as an investor, you may fear that if you don’t buy now, the coin will hit an all-time high, which may sometimes not happen, and the market may actually move completely different, bringing results that you weren’t prepared for.
Now, here’s the deal: even in the most fast-changing market, like the cryptocurrency world is, if a coin’s price hits an all-time-high that quickly, it is only a matter of time until it will correct. So, don’t let FOMO take control of your investment decisions.
5. Don’t Invest Blindly
We’ve already mentioned investing blindly before, but let’s make sure you understand what it means and how to avoid it.
Investing blindly means going with the trends or listening to other people from the cryptocurrency world when it comes to your investments. Now, don’t get us wrong, some traders may genuinely want to help and give you a pro tip that actually works. But most of them often share their “opinions” to exploit less-informed investors. They might tell you to buy a particular coin only so that they can exit safely. So, only use your knowledge and experience when you make your investment decisions.