We understand that investing in bitcoin is thrilling! This is due, in part, to the booming crypto sector, which has witnessed a surge in activity around leading cryptocurrencies all over the globe.
This increasing activity indicates that more individuals now feel bitcoin is the future and have experienced the benefits of utilizing cryptocurrency over conventional banking systems for faster transactions at reduced trading costs and the anonymity it provides.
Another reason why many individuals are gravitating to it is the simplicity with which they may join the bitcoin trading industry. The crypto world is becoming more appealing, from purchasing cryptocurrencies using local money to finding a trading platform that enables even novices to participate securely.
More significantly, beyond its application as a method of trade, the blockchain technology on which most cryptocurrencies are based has enormous potential to revolutionize industries other than finance, such as health, education, transportation, and logistics.
This simply adds to the argument that investing in cryptocurrencies is wise. And we can see this in the increased market capitalization of prominent cryptocurrencies over time.
Bitcoin's market capitalization was 109.67 billion US dollars in the second quarter of 2017. Despite the volatility of the crypto sector, its market valuation had increased to 199.32 billion US dollars by the third quarter of 2020.
Many individuals trade bitcoin because of the volatility of cryptocurrencies. This is because more volatility in the crypto industry implies traders' entry and exit points.
That implies that as a trader, you won't have to wait long to join a market, earn a profit, and leave the market.
However, this same volatility is one of the key reasons why novice traders should proceed with caution. Here we outline the most crucial crypto trading strategies you should know :
1. Invest only what you can afford to lose
This is maybe the most crucial financial advice. It is also a method of risk management. Because the market is unpredictable and may alter at any moment, investors should only invest what they can afford to lose.
That is, don't spend your whole profits if you can't afford to lose them. Typically, individuals set aside a certain amount of their wages for investing. This, however, is a personal choice. What matters is that you invest intelligently.
2. Control your risks
Traders and investors adopt a variety of risk-management tactics. It depends on your risk tolerance, but what counts is that you have safeguards in place to prevent you from losing your whole investment. The following are some of the most prevalent methods used by great traders:
Stop loss and take profit: A stop loss order is an order to sell crypto asset when it hits a given price point to avoid further loss, whilst a take profit order is an order to sell an asset when its price increases to a certain point. Stop loss assists you in managing your losses, whilst Take Profit assures that you profit on your open orders when the price increases.
The risk/reward ratio is calculated by comparing the projected profit from a transaction with the risk you are incurring.
Essentially, the greater the risk, the greater the payoff. Understanding the risk and projected return link will help you approach the deal more prepared.
The risk/reward ratio is derived by dividing the possible reward by the maximum risk price. That is correct:
- Where the Target Price is the price you anticipate the item will achieve.
- The current price at which you join the market is referred to as the entry price.
- Stop Loss is the price at which you will sell your asset if the price goes below a certain level.
Set a profit objective: Before starting a trade, set a profit target to assist you to stay focused and not get carried away by market changes. When you join a trade with a goal in mind, you can correctly manage your risk because once your goal is met, it is simple to leave.
3. Expand your horizons
Diversification is vital because if one market falls, your whole investment does not suffer. This might imply investing in more than one cryptocurrency. However, it also implies not just trading in cryptocurrency, but also in stocks, FX, or any other market with which you are familiar.
4. Choose a crypto trading platform
After purchasing your first cryptocurrency, the following step is to locate a cryptocurrency trading platform. While some trading sites enable you to purchase crypto directly with your local currency, the prices are generally higher since it is primarily a trading platform.
Furthermore, it is preferable to have a Bitcoin wallet where you can be certain that your money is secure like Coinbase Best Crypto Wallet for the beginner so that if you need to trade, you may send the amount you plan to deal with to the trading platform.
We've written extensively on how to Choose The Best Cryptocurrency Exchange Sites. The guide will guarantee that you make the correct decision before committing to a platform. After you've decided on a trading platform, you're ready to begin trading cryptocurrencies.
Last Thoughts
The more you trade, the greater your understanding of the market and ability to make sound judgments. It does, however, need that you gather relevant market information to aid in your decision-making process.