The cryptocurrency market is as exciting as it is treacherous. It lets you believe that you’ve made it pushing your digital currencies to 100% profits and beyond, only to obliterate all your profit in a single daily candle. In fact, there’s a popular statistic that claims that 90% of traders exit the market at a loss. Unfortunately, nobody can read the future, especially when it comes to crypto. However, there are a few elementary tips to consider if you want to be prepared against market crashes.
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Cryptocurrency trading basics
The cryptocurrency market is unlike any other. Due to its high volatility, it demands constant attention. It’s very hard, even for seasoned traders, to catch up with the market’s pace. This might sound obvious, and we’re sure you’ve heard it a lot, but it’s worth repeating. You wouldn’t believe how many people have lost everything trading crypto assets, so it’s worth mentioning: Only invest what you can afford to lose.
It’s okay if you lose money. Everybody does. Just make sure you don’t need it for anything else. If you need to practice, many crypto exchanges like Binance offer demo accounts to practice without the risk of losing your capital. It is a great tool to get started and learn how digital assets trading works.
Crypto rewards patience more than it does boldness. Take your time to learn everything you can about trading, and never let your impulses or FOMO take over.
Define your crypto trading goals, exit strategies and alerts
One of the most common mistakes of new traders is diving into the market without a plan. Let’s be as precise as possible. The second you invest in a coin, you must already know at what price you will take profits (we’ll come back to this) and sell your entire position. On the other hand, you should also consider up to what point you’re willing to lose money on it.
Once you know your plan, you should do everything you can to follow it. As we said, the crypto market is volatile, and you can see a once-in-a-lifetime chance fly right by you in a couple of minutes. You must prepare to catch it.
How? Crypto exchanges let you place limit orders to sell or buy a token when it reaches a specific price. You can also set up price alerts that will send you a notification when that happens. Finally, you can configure stop-losses to protect your savings in case an asset is going down fast.
You should also keep a journal to record all your movements and operations. This has proven helpful to identify what you did right and wrong. Also, to avoid repeating mistakes and maximize profits.
Manage your balances
It’s easy to get lost among the tremendous amount of cryptocurrencies and all the sudden changes they can go through in a short time. You should always keep an eye on your portfolio balances. See what assets you might be over or underexposed to, and balance it accordingly.
Sometimes, cryptocurrencies tend to follow cycles or “seasons”, as the community likes to call them, in which you may see money flowing from Bitcoin to altcoins and vice-versa. Although this is not a precise science, portfolio diversification is a good idea to reduce losses if unexpected events happen.
A valuable tip is to always have some percentage of your balance in stablecoins. That way, you ensure you have a reserve fund to “buy the dip” and seize any opportunity for a low entry.
You can set up price alerts, check cryptocurrency prices and manage your portfolio using The Crypto App. Try it out for free.
Use fundamental analysis
We’ve already talked about technical analysis and the use of indicators. Now is the turn of fundamental analysis. This practice focuses on a token’s value, usage and project rather than its price action. It is also a good way of identifying what we call “hidden gems”.
Before buying any coin, ask yourself:
- What does it do?
- What problem does it solve?
- Who is developing the project?
- What are the tokenomics it abides by?
If a project has good fundamentals, the price will eventually catch up to them. So remember, next time a coin dips into oblivion, look at its fundamentals before panic-selling. If you trust the project, the team behind it and the added value it has, there’s a chance it will recover.
Last but not least, remember to secure your hard-earned money. Your trading performance can turn upside-down in a matter of minutes. We can’t really stress that enough.
Nevertheless, this doesn’t mean you need to exit the market. As you see your portfolio value increasing, you could start cashing out a part of it to stablecoins. If you’re a holder, you can even cash out to Bitcoin and safely store it in a cryptocurrency wallet.
Nobody says you can’t reinvest it later or, as we said, buy the dip when it comes. Because this is crypto, and it will come. Make sure it doesn’t catch you off guard.
Ignore the noise
Everyone wants to be a genius, and they will do anything to make you believe they are. From clickbaity YouTubers to Twitter scammers, everyone will have something to say to try and get your attention or drive you into their low-cap scam coin.
Don’t go with the flow; educate yourself instead. Learn fundamental analysis and risk management. Doing your own research and trusting your gut makes a big difference. Just because lots of people are getting into a project doesn’t mean it’s good. If someone offers you an opportunity too good to be true, it probably isn’t.
The idea that crypto is easy money and a “get rich overnight” scheme is false. It is a promising and disruptive technology that will probably change the world in the long term. You’ve got the chance to get in early. Let’s not waste it chasing scams and pump-and-dump schemes. Shall we?