When it comes to the crypto industry, money attracts money. But it is, however, not as easy as it sounds.
With more than 220 million crypto-asset users in June 2021, as Statista shows, there is no doubt that the crypto market is having a real moment. But crypto can also be very tricky, and if you do not have the necessary preparation before embarking on this arduous journey, you are likely to lose large sums of money. To understand crypto, you need to understand first the technology behind it – blockchain technology. This allows individuals to hold sets of information safety due to decentralization and cryptographic hashing. Dealing with the risky but fascinating crypto market can be challenging, particularly if you do not know much about this domain.
But you do not have to worry: there is a start for everything. Moving into this space can be a pleasant experience if you get familiar with some good practices. But you also have to be well aware of the common mistakes made in trading. That is why we have rounded up a list of the main do’s and don’ts of crypto trading, so keep reading to find out what it is all about.
DO your research
Before starting the game, you need to have a fair idea of the cryptocurrency market. We know that it might seem overwhelming (and we will not lie to you; there is a lot to learn), but if you start with baby steps and get informed first about the basics and then dig into the subject, there is no way to fail. Take the necessary time to get in the picture of cryptocurrency: learning the fundamentals, researching the market, reading the recent news about the industry, and educating yourself on the various dynamics that lead to a profitable and safe trading environment. You cannot prevent a loss, but you can constantly work on relating to the market movements so that you can be prepared to deal with the unexpected.
Even after starting operating in the crypto market, make sure you always read a crypto’s whitepaper before investing in it. It would help if you determined the best crypto you can start with, the exchanges or brokers you want to use, and the wallets for depositing your digital coins. Wallets, for example, are either online or offline (“hot” and “cold” wallets), so think about what variant would best compliment your needs so that you can make the right decision.
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DO plan your budget
There is one well-known principle when it comes to crypto: do not invest money that you cannot afford to lose. Thus, plan your budget carefully before taking the crypto route to avoid surprises coming afterward. If you are disposed to take the risk and know that you will not miss the potentially lost money, then good for you – there are lower chances of taking it personally and falling into the trap of emotional distress.
However, you should never place your economic stability at risk, whatever your financial possibilities. Even the most experienced traders care about their budget in advance, so consider how much you are willing to invest before entering the crypto market.
DO have a strategy
The #1 rule when talking about crypto is never trading without a well-thought plan in place. You surely heard about people who made millions from crypto, and you may want to follow their strategies, but the recipe for success is not always the same for everyone. Thus, you should work on your own strategy, and this is possible only if you study the market. Firstly, you have to determine the technical indicator(s) that best suit(s) you – RSI, MACD, EMA? Then, decide on your ideal profit target. You can start with a 2:1 ratio and, as you gain more confidence, move to 3:1. Ask yourself if you need a trading bot or if you want to trade long-term or short-term; you have to clarify all this before entering the game.
DON’T follow social media hype blindly
Social media may be helpful, but when it comes to research on trading, you should not make it a leading source of information. Even if it is hard to believe, there are a lot of trading “gurus” out there who claim to be experts in this field, but the truth is that most of them have their interests. Besides, you are the only one who can determine the best trading strategy based on your particular needs. That is why we recommend staying away from unofficial and unverified sources of information, mainly when talking about such a huge movement. You can find on social media personalities that share their opinions on the various cryptos available or make predictions regarding prices; ignore them. If you are wondering what is the price of Ethereum, for example, check it on official websites like Binance, Coinbase, or CoinDesk.
DON’T plunk down large sums of money
As a crypto trader, it is imperative to understand your risk-reward acceptance level, but even so, you should be careful not to spend too much, especially if you are a beginner. If you are thinking about trading Bitcoin, which is also the most famous cryptocurrency at the moment, do not jump into large sums. So, instead of buying $2,000 in bitcoin, begin with $500. All this time, do not forget to constantly check the crypto’s volatility. If it’s moving up, add another $500 and so on. But do not make sudden movements and invest in cryptos you know nothing about. The market abounds in digital coins, but most are still in the early stages or unknown. Or, instead of investing in such popular cryptos, take your time to research other growing assets with a pattern of a constant upsurge in market value.
Other important do’s and don’ts are:
- DO watch out for the dips
- DO learn to diversify
- DON’T choose cryptos you haven’t researched
- DON’T trade without a stop loss
Do you find these insights helpful? We hope so. Remember that trading will no longer seem daunting once you know these rules.