The best trading tactics often come from years of investing in cryptocurrency markets. With this useful guide, any beginner can learn how to come up with the best trading strategies and avoid common cryptocurrency mistakes.
If you want to invest in cryptocurrencies, here are some tips to help you get started.
Have A Strategy
It isn’t easy to separate genuine cryptocurrency recommendations from scams. There are plenty of scammers out there wanting to take your money. Reports of crypto investment scams surged in recent months, with victims losing substantial amounts of money.
When you’re faced with a lot of information about a cryptocurrency, take a step back and review things carefully before you take the leap. Look critically at the project or platform. How many users does it have? What problem does it solve? Stay away from coins that promise the world but haven’t yet delivered anything tangible.
Some people who offer crypto trading tips will not always have your best interests at heart. Don’t get stung making the same mistakes as others. Set limits on how much you invest in a particular digital currency and don’t be tempted to trade with more money than you can afford to lose. Cryptocurrency trading is a high-risk business and more traders lose money than don’t, even when they’re earning interest on crypto.
Diversify Your Crypto Portfolio
It’s not a good idea to have too much invested in one cryptocurrency. Don’t put all your eggs into one basket. In the same way as stocks and shares, spread your money out among different digital currencies. This means that you don’t risk being over-exposed should one of them drop in value, especially as the market prices of these investments can be very volatile. There are thousands out there to choose from, so do some research.
Be In It For The Long Term
Prices can rise and fall very dramatically day to day and novice traders are often duped into panic selling when prices are low. However, many traders try to keep on top of the changing market through Bitcoin websites which provide them with the BTC price chart. Cryptocurrencies are not going to go away. Leaving your money in the crypto market for months or years at a time could offer you the best rewards.
Just as with regular stocks and shares, it can be a good idea to automate your crypto purchases to take advantage of pound-cost averaging.
Most cryptocurrency exchanges will allow you to set up recurring buys.
A recurring buy is where crypto investors tell the platform to purchase a fixed amount of their preferred cryptocurrency every month, for example, $100 worth of bitcoin. It means that they get a little less of the currency when prices are high, and little but more when prices are low.
That takes the stress out of trying to time the market by either buying a currency at what you think is the lowest price possible or selling at the highest price. This is something that even market professionals struggle to get right.
Use Trading Bots
Trading bots can come in useful in some circumstances, but they aren’t recommended for beginners who looking for crypto investment tips. Often, these bots can just be scams in disguise. If a real algorithm existed that timed your buy and sell trades to perfection, everyone would be using them.
Common Crypto Mistakes
More and more people own cryptocurrency in one form or another. It can be very to get caught up in the hype of news headlines. Crypto mistakes are very common. Here are some to make sure you can avoid.
Buying Just Because The Price Is Low
Low prices do not always mean bargains. Sometimes prices are low for a reason. Watch out for cryptocurrencies with falling user rates. In some cases, developers leave a project and it stops getting updated properly, making the cryptocurrency insecure.
Some of the less secure trading platforms will encourage you to maximize your money by betting as much as you can. Doing this is a fast way to lose your money.
A better tip for cryptocurrency investment is to only use a certain proportion of your investing capital, such as 5%, and always keep an emergency cash fund in an easy access savings account that never gets invested in the market.
Thinking Crypto Is Easy Money
There is nothing easy about making money through trading any kind of financial asset, whether stocks and share or commodities like silver and gold. The same thing can be said for cryptocurrency. Anyone who says any different is probably trying to trick you into making crypto mistakes.
Forgetting Your Crypto Keyphrase
If you have a hardware wallet and store your crypto offline, forgetting your keyphrase is like losing the keys to a bank vault. Without the keyphrase to get in, all your cryptos are lost.
Falling For Scams
Be wary of crypto deals that sound too good to be true. There are some common crypto scams that you should be careful of.
Cloud Multiplier Scams
Sometimes, a scammer will contact you by email or text with an investment opportunity. They promise to give investors double or triple the amount they have out into bitcoin if they send their cryptocurrency to a particular digital wallet.
Offers for free money should always be treated with skepticism.
Pump and Dump
Criminals can inflate or deflate the price of small or unknown cryptocurrencies, sometimes sending the value of these currencies soaring.
Sometimes, these people own a lot of a particular cryptocurrency, though pre-mining before it is available to the public. When unwitting traders try to get in on the action, the scammers wait for the price to increase before selling their coins, causing the price to crash. Prices can be pumped up through promotion on social media, before selling at a higher price.
Malicious Wallet Software
Stick to big-name crypto wallets. Dodgy or unknown wallets could steal your money through bad code.
It can be hard to tell which coins are real and which aren’t. If you invest in fake coins, criminals can steal your identity and your money. Don’t trust just anyone and use as many sources as you can to do your own research on coins before you buy them.
Know Your Crypto Lingo
There is a lot of jargon around crypto and it can be hard to decipher. Use this list to help you understand some of the lingo and avoid getting confused by the language of crypto trading.
Altcoin. Altcoin or alternative coin means any cryptocurrency other than bitcoin, the original.
Cryptocurrency exchanges. Like the regular stock exchanges, such as Coinbase, Binance, Geminin, and Bitstamp. These allow traders and investors to buy and sell, except they are trading in cryptocurrency. Unlike the standard stock markets, cryptocurrency exchanges are online only and are open 24 hours a day, seven days a week.
Limits. Most exchanges do set limits or restrictions on the number of cryptocurrency traders that their users can make in a day. On turbulent trading days, when prices are moving up and down quickly, some brokers might put a short-term halt on people depositing funds on their platforms.
Shorting. Shorting cryptocurrency means betting on the price going down rather than up.
Forks. A cryptocurrency fork is split in a blockchain where two separate blockchains are created. This is sometimes due to a disagreement between developers about how the blockchain should be organized. For example, in 2017, bitcoin forked into separate blockchains: bitcoin and bitcoin cash.
ICO. This is an initial coin offering where new cryptos are sold to investors for the first time. This is similar to an initial public offering (IPO) in the stocks and shares world.
Margin trading. This is when investors borrow money to increase their bet on a cryptocurrency. Be very careful if you decide to do this, as margin trading can dramatically exacerbate losses if a trade doesn’t go your way.
Fiat. A fiat currency is one that is backed by a sovereign government. For example, US dollar or sterling.
Cloud mining. People can mine or create cryptocurrencies to compete for rewards like newly minted crypto. Cloud mining uses remote data centers with shared processing power to pool resources and cut the cost of mining. Be wary of these, as a lot of cloud mining companies are just scams. A huge amount of computing power is needed to mine the top cryptocurrencies. Anyone who is offering easy cloud-mining rewards is likely to be a scammer.
Bull markets and bear markets. These phrases have been borrowed from the traditional stock markets. A bull market means that traders are confident in the prospects for a particular investment, which means that they will keep buying and prices will keep rising, whereas, in a bear market, traders are more nervous, which usually causes prices to fall.
Sell orders. A sell order is an instruction given by traders to a platform to sell cryptocurrency that they own when the price hits a certain point. In more traditional markets, this is called a stop loss.