Crypto trading is a serious undertaking, where one will no doubt have put a fair amount of time and thought into. If you want your capital to yield a profit, Below are 5 rules you have to follow.
Invest in what you know
Warren Buffet has a great investing rule: he only invests in things he knows. If he doesn’t understand the business, he doesn’t touch it. In a market with thousands of assets to buy in, with daily huge volatility, some coins produce daily gains of 1000%, many may get tempted to buy in whatever may seems “sexy”. The rule here is, to always research on the fundamentals of whatever coins you are buying in. One good tip here is to make sure that the coins you buy into are still working on their project, and delivering on their promises.
Don’t get over greedy
Greed is good! Well, a certain amount of greed is good because it’s needed to make speculators want to trade in the first place. A downside to greed is when it causes traders to ‘chase the market,’ for example by buying after a large sudden move higher when the market is overbought (i.e. overvalued). You also need to avoid being too greedy when exiting your trades i.e. you should take profits where your proven trading method says you should. Countless of traders have trades that turned from profits to losses because of been too greedy, and this is why you should never try to chase the peak, remember, the market is very unpredictable.
One golden rule that all pro investors know is that you should never put all your eggs in one basket when it comes to investing. Although you have a greater potential to get a more substantial amount of money when you invest in a single coin, the risk of losing more money is equally magnified, if not bigger. So, the smart thing to do to avoid losing a lot of money if a particular coin takes a hit is diversifying your investments and investing in different currencies.
Do not FOMO
Fomo also known as Fear of missing out, means ‘’anxiety that an exciting or interesting event may currently be happening elsewhere, often aroused by posts seen on social media.’’ FOMO is the weak spot in investing that makes investors lose money most frequently. It only takes a bit of media hype, a few opinions from investment “experts,” and a little bit of insecurity from your part to make you make a wrong decision. In fact, the same recipe is what made Bitcoin prices rise from $10,000 to $20,000 in December 2018. Now, investors may look back and think that if they had waited one more month, they could have bought the cryptocurrency at $9,000 instead of waiting until the coin hit $20,000 again. Usually, when a coin gets extremely hyped, especially in social media, many will rush in to buy despite the prices already rising many folds. as an investor, you may fear that if you don’t buy now, the coin will hit an all-time high, which may sometimes not happen, and the market may actually move completely different, bringing results that you weren’t prepared for. Now, here’s the deal: even in the most fast-changing market, like the cryptocurrency world is, if a coin’s price hits an all-time-high that quickly, it is only a matter of time until it will correct. So, don’t let FOMO take control of your investment decisions.
Always pay attention to Bitcoin
Most altcoins are pegged more closely to Bitcoin than Asian currencies were to the USD during the Asian Financial Crisis. If Bitcoin prices pump drastically, altcoins prices can go down as people try to exit altcoins to ride the BTC profits; inversely, if Bitcoin prices dump drastically, altcoin prices can go down, too, as people exit altcoins to exchange back into fiat. The best times for altcoin growth appear when Bitcoin shows organic growth or decline or remains stagnant in price.