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Are you interested in crypto trading? If so, you’ll have heard of bit coin. However, have you heard of the new Chinese digital currency the e-yuan. It is probably the best cryptocurrency to buy now. It’s got a big future.
If you are interested in trading it then it’s no hard to know the ins and outs of trading crypto and in such an instance, here are some of the tips you need to know according to leading crypto investment portal, YuanPay Team.
- Have A Reason Before Entering Any Trade
Trading digital currencies is a pretty risky affair from the get-go. That said, you want to be particularly cautious before getting into the game, and especially cryptocurrency trading. It doesn’t matter if you are looking to day trade or scalp; the chances of winning and losing are pretty similar and go hand in hand. It would help if all your trades are based on true purpose and reason, not what other people are doing.
The crypto market is largely controlled by the big ‘fish’ that have been in the market for quite some time and understand it quite well. Much like those that trade on Bitcoin, these individuals have one skill and virtue in common, patience. They will thus wait for ‘newbies’ and innocent traders to make the slightest mistake, then jump to claim their reward – your loss, their gain. That said, every move you make in the cryptocurrency trading market needs to be well calculated and thought out. It would be best to stay away from trades you don’t understand and only enter a trade you not only understand but are confident in.
- Have A Set Profit Target And Use Stop Loss, Always
Stop Loss is a common term and practice in the world of currency trading. It exists for a reason and one of the best features to use to protect and determine your losses. While the main aim of each trade is to make a profit, you need to understand and know just when to get out. A precise stop loss level is, however, required to reduce/cut your losses.
You also don’t want to use the stop loss feature as an option but in all your trades. The cost of your coin or money invested in the trade is a great point to set your stop loss at. Let’s say your coin is worth $1000, then the lowest point you should let the trade go would be just that ($1000), and nothing more. This way, you will only lose the amount invested in case the worst happens.
In addition to predetermining your loss, you still need to have a set profit margin for each trade. While the market may show signs of tilting in your favor, experts recommend sticking to the minimum set profit no matter what the circumstances are. Greediness isn’t a virtue in cryptocurrency, as it has proven to be expensive for many.
- Be Wary Of FOMO
Fear of missing out, or FOMO, is a common slogan and phrase with many traders today. While you would want to join everyone’s bandwagon, especially if they have chosen to camp on a certain currency or if it seems to work in their favor; it is the exact reason for you to stay away. As the saying goes, if it looks too good to be true, it probably is. Most of these situations don’t turn out well for many, and a reason most traders have failed in the art.
If all candles have suddenly turned green, screaming at you to join, it is the exact moment that seasoned traders are holding off to see you make a mistake. Unless you are confident of your prediction and have researched the current trend, it is probably best if you stayed away. With more and more traders jumping to invest, the higher the risk of the candles turning red, leading to massive losses. Only a careful and patient trader will cash in big in such instances. Find the
- Learn to Manage Risks
The art of cryptocurrency trading is an interesting one. The most successful traders hardly ever focus on massive profits but have their eyes set on the small but sure profits. Cumulatively, the small but sure profits add up to lots of money in the long run and have an even higher tolerance level. This is unlike pricey trades that seem promising but are all over the market. This is one of the reasons it would be advisable to invest in lower-risk portfolios with stretched stop loss and target profit points.
- Understand the Volatility of the Cryptocurrency Market
Almost all altcoins on the market today are dependent on Bitcoin’s market price and value. Bitcoin isn’t, however, as stable as many of us would want, making the market even more volatile. It is also worth noting that the value of altcoins will dip if the value of bitcoin goes improves and vice versa.
The volatility of bitcoin means you need to be careful with the coins you are trading with and set close targets for the same. Choosing a more extended trade period thus increases the risk of making losses.
- Make an Informed Buy (Not Just That the Price Is Low)
Never make a rushed decision to buy a coin simply because its price seems to have dropped. An excellent example of this is choosing to buy Ripple instead of Ethereum because Ripple is cheaper/affordable. The decision to buy a coin shouldn’t be based on its affordability or price but rather on the market cap. You thus should treat cryptocurrency trading the same way you would conventionally stock.
To put it into perspective, would you rather have 1 million worth of shares on a $10 coin or 100,000 shares on a $100 coin. When investing and trading in currencies (cryptocurrencies), the rule of thumb is to focus on those with a higher market cap compared to low-value ones. That said, you are safer trading on the $100 coin than the $10 one. The higher the coin’s market cap, the better it is for you to invest in.
- Pro Tip on ICOs/ Crowd-Sales
Have you ever wondered why startups offer a lower initial coin offering (ICO) in the form of a crowded sale, with a promise for the same tokens to sell at a higher price after the coin is launched? While some ICOs may be quite successful and even sell at more than ten times the initial price, there are numerous cases of ICOs turning out to be scams. Millions of investors have lost lots of money in such scams, a reason you need to do a background check on a coin or startup before falling for crow-sale advertisements. A simple background check on the said startup, or coin, should give you actionable information on whether to invest in them or not. Most scams will have red flags all over, most of which many people are willing to overlook, especially when focusing on the promised returns.
Although some ICOs may prove advantageous and profitable to invest in, the largest percentage of them are merely scams. That said, you need to do your due diligence to see if the coin is legit or not. Take some time to analyze the startup’s ability to live up to their promise and even approach them for verification. Be sure to pole holes in their project to see if the answers provided are convincing enough for you to consider investing with them. You might also want to check reviews on the said startup to see what other people, especially investors and traders, say about that specific ICO. A legit ICO will have very few to no red flags and make actionable promises, while scam and fake ones will promise you more than anyone can deliver.
