3 Practical Tips that will Help You Avoid Initial Mistakes and Enjoy Cryptocurrency Trading
If you want to enter into the bitcoin or any other cryptocurrency market but are wondering where to start, here are certain easy tips that will save you from rookie mistakes and make your entry in the market profitable. Consider these tips as a friendly advice and not a professional investment advice.
1. Know Why You are Trading
Enter a trade only when you know why you are trading and ensure you have a clear strategy for the trade. Not every trader makes a profit from trading because this is zero-sum (one wherein you make benefits if someone loses on the other side) game. The Bitcoin and Altacoin markets are driven by big whales who are waiting patiently for small fish like novice traders to make mistakes. Even though you wish to trade daily, sometimes it’s wiser to earn nothing and do nothing, than to jump into the gushing water and risk your coins to losses. There are days when you are at profit only by not trading at all. You can study the trends at coinmarkets and act accordingly.
2. Set a Clear Target and Stop-loss Level
For every trade, you should set a clear target for making profit and also a stop-loss level for minimizing losses. A stop-loss level is the level of loss where the trade will be closed.
To set a stop-loss level correctly, you have to consider many factors. Most traders don’t succeed when they start loving a trade or the coin itself. They hope that it will turn around and they will get out of that trade with a least loss. Here they allow their ego to overtake them; but unlike the regular stock exchange where extreme every day movements are thought to be 2-3% in value, Crypto trades are far riskier. There were events when a coin dumped by 80% just within a few hours. And no one wants to hold it.
3. Know if You Wish to Go Long or Short
Are you going short with each penny you would have to invest or do you wish to go long with some and short with others? Those who go long have to pay a lower tax rate if they can keep it up for more than 12 months, but in exchange they need to sit through rectifications (possibly seeing their balance reducing 50% plus on paper as frequently as they see it go up). Short-term investors can skip rectifications if they are agile but they will have to pay taxes on the profits from every trade they make along the way.
Remember these tips so that you can at least avoid some initial mistakes and continue learning the Crypto trade with minimum loss. Enjoy trading!