Trading cryptocurrency is both exciting and interesting. For one, it’s open to the public. Unlike stocks and other assets traded globally, there are very few gatekeepers blocking you from trading these assets and earning profits. Crypto trading is a hot topic right now, especially as Bitcoin and other coins are at an all-time high.
If you want to become a successful trader, it’s going to take some research and time. Nobody starts off as an amazing trader and the volatility of cryptocurrencies can make trading seem like a very difficult task. However, with some research and patience, you should be able to hammer out a trading strategy that fits your personality and long-term goals. Here are some tips to help you go from a newbie to an experienced trader in no time.
Tips to Drive Your Trading Strategy
The first and most important thing to understand as a trader is that you will need to DYOR (do your own research). This statement may seem obvious but it’s worth breaking it down to better understand how it can affect your results. The term DYOR is an acronym that means you need to always double-check the information you receive.
As most traders get their information online or from word of mouth, it’s easy for misinformation to run ramped through the market. For example, in the early days of cryptocurrency and still somewhat recently, there was a false belief that Bitcoin was anonymous. This belief was exasperated by endless news stories and online posts regarding the token’s early usage within the Silk Road.
However, anyone who takes the time to fully research and understand Bitcoin knows that this statement is anything but true. Every transaction made on the Bitcoin blockchain can be tracked and is publicly viewable to anyone with access to the most basic blockchain explorer. Additionally, the creation of blockchain forensic firms has made the process as easy as paying a group to unmask the origins of a transaction.
Applying DYOR to Your Trading Strategy
A more recent example of how the DYOR concept can save your profits is the Bitconnect fiasco. Bitconnect was a crypto Ponzi scheme that promised to repay lenders insane profits for their crypto loans. However, anyone who took the time to research the platform’s technical characteristics could easily see that the protocol was unsustainable. As such, it quickly failed and left investors holding the bag.
Part of doing your research is sharpening your analysis skills. There are multiple ways to analyze a crypto project today. Professional traders may utilize a system called technical analysis. This approach requires you to review the indicators regarding a project including charts, price history, and recent market developments.
Technical analysis may seem difficult at first but the introduction of helpful tools and metrics has simplified the process over the last 3-years considerably. Crypto traders have the advantage of access to most stock trading technical indicators. Tools such as the MACD or Bollinger bands represent unique ways of gauging the market movements of a project.
The main goal of these indicators is to enable you to see when a potential breakout is about to occur. The term breakout refers to when an asset begins to break free from a trading range. Catching these trends before the rest of the market can help you to improve your ROIs considerably.
Uniquely, the internet plays a vital role in the growth and expansion of cryptocurrencies. As such, you can also measure the amount of online discussion and the temperament of these talks to better gauge a project’s potential. For example, when one of the world’s richest men, Elon Musk, posted a meme that had the famous Shiba Inu from Dogecoin on it, it was a sign that the project was set to receive a major bump in traders.
Monitoring social media activity is one of the best ways to determine the movements of a particular project. Reversely, if a project has very little social media activity, it’s safe to assume that traders are losing interest in the project which may result in less trading activity and a loss in value.
Another great way to stay ahead of the curve is via signals. Signals are company-published statements and posts that are directly meant for traders to view. These posts are usually published via market management tools. For example, when you sign up for the FTX market management Dapp, you gain access to custom signals.
These tools allow you to select projects to receive signals from directly. Signals are great because they can notify you of major company developments such as the launch of a mainnet or a CEX coin listing. Both of these activities are historically followed by large upswings in price.
Buy Low Sell High
Once you have narrowed your selection down to projects you see potential in, you’re ready to begin trading. It’s often said the secret to trading is to buy low and sell high. While this strategy seems obvious, it’s actually quite difficult for most traders to follow as it goes directly against human nature.
When people see a project shooting upwards, they experience a phenomenon called FOMO (fear of missing out). FOMO is extremely dangerous for new traders as it can cause them to jump on projects that are at their all-time high. It can also make you want to trade out of your holdings during market downturns. However, these actions are the exact opposite of what you need to do. Consequently, you must conquer FOMO to become a successful trader.
Diversify Your Holdings
Another great way to better your trading strategy is to diversify your holdings. The crypto market is full of exciting and new projects worth watching. Finding a nice basket of assets can help you to obtain a more consistent ROI versus one project. Diversifying your assets is an age-old strategy that still remains relevant in the digital economy today.
It’s not always Cut and Dry
Another vital lesson to understand is that there are large traders called whales that can make your time more difficult. These major traders can shift the market metrics and make projects look appealing for a moment and then tank their value. Thankfully, platforms such as META 1 have begun to institute whale manipulation protections for users. These systems insulate you from pumps and dumps and other whale schemes to take your earnings.
Crypto Trading Strategies for Beginners Part 2 – Let the Games Begin
Now that you have some insight into what it takes to be a successful trader, you are ready to enter the market. The general rule of thumb for new investors is to never trade more than you are willing to lose. Remember, there is a learning curve that you must overcome. Additionally, there are some outside influencers that can also affect your results.