If you’ve been itching to get into cryptocurrencies, check out Market Traders Institute’s Crypto Navigator, where you’ll be able to follow along with the exact open and pending trades of a cryptocurrency analyst, Jeff Watkins. Click here to check out Jeff’s short video and his crypto track record.
The cryptocurrency market has exploded in recent years. And almost every trader has some interest in this new asset class. Many are either trading it already or are interested in doing so.
The reasons are palpable. Cryptos have delivered eye-popping returns and social media is abuzz with how alt coins like Bitcoin may have barely scratched the surface of their enormous potential.
However, crypto trading is not as simple as it is made out to be by some traders. While many think the crypto market can help quickly shoot up their capital, this segment is more complex and many traders end up losing money in no time.
That’s why it’s important to have a few rules and strategies in place before you start trading cryptos.
In this article, we will take you through six commandments that we believe crypto traders should follow in order to try to minimize risk and maximize potential rewards.
So, let’s jump right into it…
#1: Buy Cryptos That You Understand
Cryptos and the blockchain are an entirely new technology and many people still don’t get it. That’s well and fine as the technology can take its time for widespread awareness.
However, trading in cryptos is a different ball-game altogether where you invest your hard-earned money in a highly volatile market. And that’s why it’s important to know the facts about the cryptocurrency you’re trading in.
Before buying a cryptocurrency, you should know about its…
- Technology
- Use Cases
- Acceptance and Popularity
- Market Capitalization
- Trading Volumes
- Volatility
- Any other important details
Ask yourself what is the cryptocurrency doing and does it make sense?
Knowing these basic things can go a long way in making wise decisions when you’re trading any particular crypto. It helps you trade in a disciplined and informed manner, and can help you manage risk. So, always buy cryptos that you understand.
#2: Trade Small and Allocate Your Money Wisely
While many cryptos have given phenomenal returns, one should not get carried away by these numbers. That’s because just as these rising cryptos, there are many others that have plunged a great deal in no time.
A better approach is to invest small amounts of money in the cryptocurrency you’re interested in and keep on dollar-cost-averaging your investments in it. Another approach is to keep adding small amounts of funds until your position size for the cryptocurrency is fully funded.
Not only can this help protect your capital from unexpected and sudden losses, but it also helps you diversify your crypto portfolio and brings down your average buying cost.
Other than the above, one should also follow an asset-allocation strategy while trading cryptos.
Know what percentage of your total funds are you willing to invest in crypto markets given the high risk involved. Furthermore, decide wisely on the investment allocation between Bitcoin, stablecoins, and altcoins based on your risk-return preferences.
Doing so can help protect your capital from crypto market crashes and set your asset allocation goals straight.
#3: Master Your Mindset and Control Your Emotions
Crypto trading can be a high-risk, high-reward game and you must be able to digest long periods of high volatility.
Because prices in the crypto markets fluctuate a great deal, you should be prepared to see downfalls in your portfolio every now and then. Just as the rises, downfalls are a part of this game and you shouldn’t react to them by abandoning your strategy.
In fact, you can use these fluctuations to your advantage by using strategies to try to profit from them.
Moreover, you should also approach crypto markets with a winning mindset. This means having the knowledge and mastering your trading mindset to stay focused and disciplined.
For example, you shouldn’t trade any cryptocurrency just because it’s in the news and the so-called gurus are pitching it. Instead, keep your temperament in check and do not trade them with the fear of missing out on gains.
So, master your mindset and keep your emotions in check. It can go a long way in developing key trading skills and habits in crypto trading as well as in life.
#4: Have a Trading Plan in Place
The crypto market may appear difficult to gauge, but it can become a more engaging and manageable affair with a well-planned strategy.
Having a strategy becomes important in crypto markets as it helps you avoid making emotional decisions in times of huge volatility. Plus, it also sets specific parameters of your ideal trade and makes trading way easier.
Here are a few elements your trading plan for each crypto trade can have:
- Your investment rationale for buying a particular cryptocurrency
- Trading strategy for each cryptocurrency
- Specific entry point(s)
- Identified target or exit level(s)
- Stop levels based on your risk-to-reward ratio
- How the plan changes in times of huge market volatility
The next important thing now is to stick to your plan. Because no matter how good your plan is, it won’t work if you don’t follow it.
#5: Know the Nitty-Gritties of Crypto Trading
Because cryptos are a new asset class and they trade globally 24/7, they come with slightly new and different set of rules. So, it becomes important to be aware about the nitty-gritties before you trade them.
A few things you should know are…
- Crypto regulations in your country
- Rate of mining for a particular cryptocurrency
- Established and trustworthy crypto trading platforms
- The buying/selling process and trading fees involved
- Taxation rules for gains on crypto
- Secure login processes and protecting your private key
- Margin trades and margin requirements
- Credible sources of information
- How global or specific developments affect a particular cryptocurrency
…and much more of such basic yet important things.
These will help you understand your crypto investments better and also help you set-up potentially profitable trading processes.
#6: Have a Crypto Trading Mentor
Crypto trading isn’t easy and learning to trade by yourself can get confusing and difficult at times. That’s why we believe it’s crucial to have a crypto trading mentor.
Learning from a mentor who has traveled down the rocky road of crypto trading can help you take your trading skills to a whole new level.
A trading mentor can help you…
- Understand the blockchain technology and its use cases
- Learn various crypto trading strategies
- Take you through crypto trading concepts
- Identify specific cryptocurrencies to trade from
- Choose the right tools and platforms to trade cryptos
- Develop the right mindset for the crypto market
- Take you through live crypto trading experience
…and guide you through many other such lessons.
All these learnings can help you a great deal in trading the crypto markets and lay your foundational bricks to a solid crypto market education.
And if followed meticulously, they can set you up for what could be a successful crypto trading career.
If you want to try to become a successful crypto trader, let our analysts here at Market Traders Institute be a mentor to you.
Our analyst – Jeff Watkins – has created Crypto Navigator, which provides you with crypto navigator indicators, trade alerts, and recorded crypto trading sessions that can help you potentially make money in the most exciting new financial sector of our time.
Click here to check out Jeff’s Crypto Navigator and his track record in the crypto markets.
Disclaimer: Trading Cryptocurrencies carries a high level of risk, and may not be suitable for everyone. Past performance is not indicative of future results. The high degree of leverage can work against you as well as for you. Before getting involved in Cryptocurrency trading you should carefully consider your personal venture objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial deposit and therefore you should not place funds that you cannot afford to lose. You should be aware of all the risks associated with Cryptocurrency trading, and seek advice from an independent financial advisor if you have any doubts. The information contained herein does not constitute financial advice or a solicitation to buy or sell any Cryptocurrency contract or securities of any type. MTI will not accept liability for any loss or damage, including without limitation any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
