Since the dawn of Bitcoin, many people have made it big by trading cryptocurrency. Today, there are many choices available for people to trade. Despite the potential for riches, most people strikeout. If you would like to trade profitably, there are several important things you should know.
5 Tips to Help You Trade Crypto
Anytime you pick up a new skill, it takes time to develop. If you have a talented mentor, you can cut that time down. Nevertheless, it is still up to you to put in the required effort. When it comes to trading crypto, the following pieces of information are all vital. Even people with experience in day trading should learn them. That way, you don’t lose your pants trying to double your money.
Trading Crypto Is Not The Same as Trading Traditional Investments
Although there are many similarities, trading cryptocurrency is fundamentally different than stocks. Stocks are based on the performance of a company. Suppose the company has a particularly profitable quarter. Then, the underlying stock will also increase in value. Therefore, by studying companies, you can improve your odds of a successful trade. Crypto is not like that. Instead, its value is almost entirely based on the perception of the public. When people think it is a good investment, its value can skyrocket. On the other hand, it can fall in value just as fast. All that needs to happen is a shift in public opinion. Consequently, there’s much more risk involved with trading crypto.
Crypto Can Be Incredibly Volatile
Volatility is the amount that an asset fluctuates in value. While stocks are like a rolling hillside, crypto can be more like a rollercoaster. Sometimes, your investment will shoot to the moon like a rocket ship. Then, only moments later, it will crater like a meteorite to the earth. In contrast, stocks rarely increase in value faster than 8% a year. However, you are unlikely to lose your entire investment either.
Stop-losses Can Make You Miss Out on the Upswing
Because crypto is so volatile, stop-losses are not as useful. When you trade stocks, they can be a great way to hedge against market crashes. With crypto, things are different. For instance, suppose you set up a stop loss. The investment could crash in value. Then, your stop loss will trigger. After that, the crypto could just as quickly explode in value. Nevertheless, your stop loss prevented you from capitalizing on the upswing.
Multiple Coins Complicate the Market
To further complicate matters, there are many altcoins available to trade. As such, you never know which is the next hot trade. We recommend diversifying your portfolio if you are going to put money in the crypto markets. That way, you have exposure to multiple assets. As long as a few of them perform well, it is difficult not to turn a profit. Plus, it’s much less likely for all of them to depreciate at once. Therefore, a diverse portfolio of coins can also act as a type of hedge against losses.
Markets Are Open Around the Clock
If you want to try it, you must get used to markets being open around the clock. Unlike traditional stock markets, crypto exchanges never ring the closing bell. Depending on your perspective, this could be a good or bad thing. In our opinion, it is a bit of a mixed bag. On the one hand, you don’t have to wait to make your trades. On the other, falling asleep could mean that you miss the perfect opportunity. Either way, it is an adjustment you need to prepare for.
Trading Crypto as a Beginner
Crypto is easily one of the best investments as long as you can afford to lose your money. On a good day, you could double or triple what you invest. Nevertheless, this is far from guaranteed. There are plenty of anecdotes of people making millions only to lose it all. Spend enough time online, and you will see it for yourself. Take your time when starting out. That way, you can make the most informed decisions possible.
