Ever since Bitcoin burst on the scene years ago, crypto trading has become increasingly popular. A niche that was previously a black box to anyone but those with an excellent understanding of technology and currency markets has since been opened up to practically all retail investors.
Knowing how to trade crypto is crucial to making a profit, however. The volatile nature of cryptocurrencies means that without a solid crypto trading strategy in place, you could very easily lose your shirt.
To build that strategy out, here are six quick tips that you need to know.
1. Diversify Your Portfolio
The first thing that you should know about crypto investing is that it shouldn’t be your entire investment portfolio.
While cryptocurrency returns are often unmatched by practically any other industry, the inherent risk in cryptocurrency also means that you should avoid putting all of your eggs in this basket.
Instead, know your investment goals and diversify your portfolio accordingly. For instance, you could put a third of your investments into a market tracking index fund, a third into growth stocks, and then a third into cryptocurrency.
2. Know Your Exit Points
Whenever you make a crypto trade, you should know at what price you want to exit that position and take your profits. If you don’t have set exit points ahead of time, then you’ll likely succumb to greed and never sell until the currency takes a dive.
By setting concrete exit points, you guarantee profits when the crypto value goes in that direction.
3. Do Your Research
Cryptocurrencies are harder to get information on since there are fewer news sources that report on crypto trends.
That’s not an excuse to avoid doing research. Use different tools and apps to get your knowledge (try this link for starters).
4. Avoid Inexplicable Volatility
You should have a solid understanding of any cryptocurrency you plan to purchase.
If that crypto is volatile, then you should know the market factors that are contributing to those price swings.
5. Forget the FOMO
One of the common ways that new crypto traders get burnt is by succumbing to FOMO (the fear of missing out).
This happens when a cryptocurrency skyrockets in value before you buy it. Then, as it reaches its peak, you purchase it thinking that you don’t want to miss out on the profits. As the crypto crests that peak, people begin to take profits and you’re left holding the bag as the sell-off occurs.
6. Understand the Industry
Last but not least, before you start trading crypto you should have a thorough understanding of the technicals behind the industry. Know blockchain and how it works, or else you won’t be able to ever fully understand the price swings involved in crypto.
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