Crypto exchanges around the world offer different features and benefits, but the internal rules are pretty much the same everywhere, depending on the domicile legislation. What is constantly changing, however, are the principles for profitable trading. What worked last year, might not work now in 2018 and vice versa.
The volatility of the crypto market itself has become a notorious subject for everyone willing to invest in cryptocurrencies, but with the recent developments in legislation and corporate acceptance of the coins, things are looking up. For example, BMW accepting Bitcoin (BTC) payments and Samsung accepting cryptocurrencies as a payment method in Latvia, Lithuania and Estonia.
In this article, we are going to focus on the important tips that withstand the test of time and are still very much relevant today. We are also going to provide you with new tricks for 2018 that you can apply in your crypto trading strategy. You should never enter into a trade without a plan and a backup plan about the coin you’re buying/selling, because without an idea or a reason for the transaction, you can’t get significant profits.
If you’re an experienced trader, you already know the major indicators for a value boost. If you’re not, you should start paying attention to the correlation between the market cap, the total and the current circulation supply of coins.
Start Small and Diversify Your Portfolio
This is the first safety tip everyone who is just starting out with cryptocurrency trading gets: “Never invest more than you are willing to lose”. Starting small is a prudent move because, as we said above, the market is still volatile. The prices have been stabilising in the last year, but they are far from set (if they were, the profits would be smaller). If you are a beginner in crypto trading, starting with a small investment will give you the time to learn the curves of the business, and if the price plummets, the loss won’t affect you drastically.
Another excellent tip for beginners is to invest in more than one commodity, or in this case, in altcoins. Diversifying your portfolio protects you and your assets because you don’t put all of your eggs into one basket.
Set a Clear Target
You should not go into cryptocurrency trading if you do not have a clear target of what you want to achieve and how you are going to reach that goal. Your strategy must be sound and logical, whether you’re analysing the market cap and the circulation supply, or you’re using analytical tools. Sometimes, the best thing you can do that day is not to trade with your crypto coins at all.
However, on the days that you do decide to buy and sell on the exchange, you should set a clear target level for profit and a clear stop point for cutting losses. Hoping will not get you far in trading, but following the numbers and sticking to your target levels will. The volatility of the market is too high for you to get carried away by a “hunch” feeling.
Consider the Technology behind the Coin
One of the best indicators so far for a price rise in a particular crypto coin has been the innovative technology on which it was built. The perfect example of this is the ether and the ethereum open-source platform. The smart contract concept revolutionised some essential aspects of the way professionals conduct business transactions, and that was a key reason for the price of the ether to go up!
Don’t succumb to FOMO (fear of missing out) or Don’t Do What Everyone Else is doing
FOMO (fear of missing out) is real. It was exposed in a paper by the American Association for the Advancement of Science in 2003 that when you experience FOMO, a stress signal is registered in the brain because of the feeling of exclusion. It’s essential for you to understand this concept in terms of crypto trading because it might save you a lot of money down the line.
If you’re always following the trends instead of conducting proper risk management, then the potential for loss increases. The most prudent way to invest in 2018 would be with small percentage investments in non-liquid markets and small profits from a highly diversified portfolio.
Crowd sales can be a great opportunity if you do your due-diligence correctly. Most of the projects today offer a first chance for investors to buy tokens and coins for a reduced price. This can turn out profitable for the initial participants of the project if the crypto-coin ranks well on the exchanges. There have been very successful ICO projects in the past, like the ethereum with 11.9 million coins “premined” for the crowdsale.
A note of importance regarding ICO’s is to be very careful about which projects you invest in and to always do your background checks. Research the professional training of the people involved in the development and if the project has any official backing from reputable sources before you jump on the bandwagon.
Sam Hoffman is a passionate finance explorer of the cryptocurrency world who likes to write about creative aspects of the digital trade. Currently, he is part of the team behind Blockbid.io content.