Top Tips for Successful Trading Cryptocurrencies
Before you even start trading cryptocurrencies, it’s easy to have some information at hand. You could use our guide “Getting Started with Cryptocurrencies” for that. It’s good to have a base of knowledge before you start.
After mastering the basics, you can take the next step: trading cryptocurrencies! The tips below can help you become a better cryptocurrency trader.
Best tip: research cryptocurrencies
It is good to do research before purchasing a cryptocurrency. Many beginners haphazardly enter a random coin because an acquaintance or friend has told them about it. This is not the right way. It is good to research, for example, the team behind a cryptocurrency. You don’t just buy a television, do you? To do this, you first look at the specifications and compare them with other models. It would be best if you also did this before purchasing crypto coins.
Spread your chances, but not too much.
When you start purchasing crypto, it’s good to ask yourself how many coins you want to buy. As a tip, we can tell you not to put all your money in one coin. It’s good to spread your investment, but don’t overdo it.
We advise you to stick to a few cryptocurrencies if you have several hundred euros. You can consider buying a few extra coins if you have several thousand euros to spend. It is also good to find a nice balance in your portfolio.
Distribution based on market cap
I prefer to invest in several larger crypto coins based on market cap (larger than 10 billion). In addition, I chose a coin that is a bit smaller in terms of market cap but has proven itself. Finally, I go for a bit riskier coins, such as an ICO.
A possible distribution could be 50%/30%/20%. See for yourself whether you want to take more or less risk.
In addition to this spread, you can determine what percentage you want to hold for trading daily and for the long term. I prefer a distribution (long-term/short-term) of about 90%/10%.
Sell high and buy low.
As a novice trader, it is wise not to step in when a cryptocurrency rises sharply blindly. It is better to step in when the price is in a dip. By looking at the history of cryptocurrencies, you can see what happened in the past. Of course, this does not offer any guarantees for the future, but you can estimate whether the currency is expensive or cheap compared to previous rates.
Advanced traders can conclude about the time of entry or sale through technical analysis, but this may still be too complex for beginners.
Selling: but how
It would be best to consider the time of sale when trading cryptocurrencies. As a day trader, for example, you can have a certain price as an objective. This is when you sell, for instance, because the price is at its all-time high (ATH). However, remember that you can probably never sell at the highest point and never buy at the lowest.
Don’t panic when prices fall.
It is important to remember that the crypto market is volatile, and the price can go in any direction. If you know this in advance, you will not panic so quickly when the price suddenly drops. Many traders get stressed at that point and sell their positions. Instead, you should stay calm and consider buying during this dip. Corrections are normal and can take anywhere from several hours to weeks.
Zoek voor een geschikte exchange
Choosing the right exchange is an important part of trading cryptocurrencies. It is advisable to have an account with multiple exchanges so you always have the opportunity to trade, even if a certain exchange is unavailable at a certain time.
When choosing an exchange, you should also consider the availability of the cryptocurrency you want to purchase. Not all cryptocurrencies are available on every exchange, so checking which coins are available before creating an account is important.
Other important factors to consider when choosing an exchange are ease of use, security, and cost. Each exchange has its fee structure, and it’s worth comparing these fees to save money.
HODL vs Day trading
Various trading strategies are possible, such as short-term trading or long-term holding (HODL) of a cryptocurrency. Our experience shows that long-term trading is generally more profitable than short-term trading. As a day trader, you have to have the right timing to get in and out at the right time, which requires a lot of experience and knowledge.
Our advice is, therefore, to hold cryptocurrencies for the long term. We recommend that you keep these coins in an offline wallet so that they are safely stored, and you are not tempted to get to them quickly.
Don’t get bothered by FOMO.
FOMO almost sounds like a disease, and maybe it is. It is the fear of missing the boat, and this can manifest itself in the form of stress. Make sure you are aware of the fact that you cannot participate in everything. New cryptocurrencies and ICOs appear daily, but the trick is to stick to your plan and shield yourself from possible gold mines.
In short, you have to make do with the crypto coins you have and be satisfied with the profit you have made at that moment.
FAQ: Successful Cryptocurrency Trading Tips
Q1: What are the top tips for successful cryptocurrency trading? A1: The key to successful cryptocurrency trading includes thorough research on cryptocurrencies, diversifying your investments wisely, understanding market cap distribution, buying low and selling high, choosing the right exchange, and adopting long-term holding strategies over day trading. Avoid making decisions based on FOMO (Fear Of Missing Out) and stay informed about market trends. For more tips, visit Investopedia’s Cryptocurrency Trading Guide.
Q2: How important is research in cryptocurrency trading? A2: Research is crucial before purchasing any cryptocurrency. It involves understanding the team behind the coin, its market potential, and comparing it with other cryptocurrencies. This step ensures you make informed decisions rather than relying on hearsay. CoinMarketCap is a great resource for starting your research.
Q3: Why should I diversify my cryptocurrency investments? A3: Diversification helps in spreading risk. Instead of investing all your funds in one coin, spreading your investment across different cryptocurrencies can protect you against significant losses if one of them underperforms. Learn more about diversification at CryptoNews.
Q4: What is a good strategy for distributing my investments based on market cap? A4: A balanced approach could be investing 50% in large-cap cryptocurrencies, 30% in mid-cap, and 20% in smaller, riskier coins. This distribution helps in balancing risk and potential returns. For market cap rankings, check CoinGecko.
Q5: How can I decide when to buy or sell a cryptocurrency? A5: The principle of buying low and selling high applies. Monitor the market for dips to buy and peaks to sell. However, avoid impulsive decisions based on short-term market fluctuations. Technical analysis can aid experienced traders in making these decisions. TradingView offers comprehensive tools for technical analysis.
Q6: What factors should I consider when choosing a cryptocurrency exchange? A6: Consider the exchange’s ease of use, security features, fee structure, and the availability of desired cryptocurrencies. Having accounts on multiple exchanges can also offer more flexibility and trading opportunities. CryptoCompare provides comparisons of various exchanges.
Q7: What is the difference between HODLing and day trading? A7: HODLing refers to holding cryptocurrencies long-term, believing in their future growth, whereas day trading involves making frequent trades to profit from short-term market movements. Long-term holding is generally considered less risky and more profitable for most investors. For an in-depth comparison, visit Blockgeeks.
Q8: How can I manage FOMO in cryptocurrency trading? A8: Managing FOMO involves sticking to your trading plan, setting realistic goals, and accepting that it’s impossible to catch every profitable opportunity. Focus on informed decision-making rather than reacting to market hype. MindfulTrader offers strategies to manage trading psychology.
Q9: Is it better to trade daily or hold cryptocurrencies for the long term? A9: While both strategies have their merits, long-term holding (HODLing) has historically been more profitable for most investors. It requires less time and expertise than successful day trading. For insights on long-term investment strategies, check out The Balance.
Q10: How can I secure my cryptocurrency investments? A10: For long-term holdings, consider using offline wallets (cold storage) to keep your cryptocurrencies secure from online threats. Always prioritize security when choosing exchanges and wallets. Ledger and Trezor offer reliable hardware wallets for secure storage.
These links are provided for additional information and should be used as a starting point for your research. Always ensure the sources are trustworthy and up-to-date before making any investment decisions.