Cryptocurrency is a volatile investment option. Unlike traditional financial assets, the value of cryptocurrencies fluctuates rapidly. This means that crypto investors can either lose or gain a lot of money in a short period of time. For example, Bitcoin experienced as much as 140% growth in value between April and June 2019, which was followed by a 30% drop in July 2019.
These fluctuations in cryptocurrency prices make them an ideal investment for those who want to earn big returns within a few days or weeks. But not so much for people who are investing for retirement or other long-term goals. So, crypto investors should choose stablecoins or other currencies that do not experience many fluctuations in value.
It’s a common misconception that diversification means spreading all of your funds between different coins and hoping one of them wins big. This is not true. The truth is, there is no magic number of coins to hold in order to achieve maximum returns; the best approach is to keep some of your funds on the sidelines at all times. You should always be on the lookout for new opportunities.
Diversification means holding only a small portion of your portfolio in highly speculative investments while keeping the rest in cash or more established cryptocurrencies like Bitcoin or Ethereum.
If you are going to take a flyer on an ICO or altcoin, then you must find out everything you can and be certain that it has long-term potential because there will probably be no trading market for it for a while. When choosing your diversification strategy, it’s important to keep in mind that cryptocurrency markets are still extremely volatile (despite recent declines), and anything can happen at any time. It’s wise never to invest more than you can afford to lose.
Buy Low and Hold
The more you know how to control your emotions, the easier it is for you to buy low and hold. The cryptocurrency market is a very volatile market. Prices can drop at any time without any warning, so you need to be able to control your fear of loss. Just as you should not be afraid to hold on in times of uncertainty and volatility, don’t panic sell when things seem bleak because you may miss out on better opportunities.
When trading, try to stay calm and avoid irrational decisions by trusting what the data says. In addition, never invest more than you can afford to lose. Even though this advice applies to just about any type of investment, it’s important in the world of cryptocurrencies because there is always some risk involved with stability in cryptocurrency value that cannot be minimized.
By following these tips and strategies for buying low and holding onto cryptocurrencies long-term, you’ll have a much better chance of making profits than if you try and win big during short-term trading sessions or swing trades. However, no matter which strategy you use, it’s always important that before making an investment in cryptocurrencies or any other asset class for that matter (such as stocks or real estate), make sure that due diligence has been done so that risk can be minimized as much as possible while still pursuing potential profits.
Set Stop-Loss Limits
Setting a stop limit is an important step in your trading strategy. A stop limit will protect you from the worst-case scenario: losing the entirety of the money you invested in a cryptocurrency.
When you set a stop-loss limit, it’s like telling your broker to sell your coins automatically when you reach that price point. This way, if the price of your cryptocurrency falls below where you set your limit, it will automatically be sold when it hits that level. The idea behind this is that by setting a specific price point at which to sell, you can prevent yourself from incurring massive losses and allow yourself to take some control of the situation.
However, because this order is triggered after the market closes for the day (at 5 pm ET), it’s possible for your cryptocurrency value to fluctuate significantly before hitting its new low and being sold at that level. It’s also important to remember that once you’ve set these limits, it’s difficult to take them back. If you change them later on down the road or decide not to use them anymore, they’ll remain in place until they’re triggered by market activity or canceled outright.
Stop-losses are a great tool for protecting against sudden dips in value, but be careful not to rely too heavily on them as an investor. While this feature offers some relief for those worried about losing their investment overnight due to volatility within their markets
Understand Cryptocurrency Trading Pairs
You need to understand how cryptocurrency trading pairs work before you dive in and start trading.
Cryptocurrency markets allow traders to exchange digital assets with other cryptocurrencies or fiat currencies like the US Dollar, which is what we call the base currency. In the case of cryptocurrencies, they are usually traded against Bitcoin or Ethereum.
So, if Ethereum is your base currency, you would be buying other alternative coins (altcoins) using Ethereum as your base currency. If Bitcoin is your base currency, then you would buy altcoins using Bitcoin rather than dollars or other fiat currencies. When buying alternative coins with a cryptocurrency as a base pair, the term commonly used is referred to as BTC/ETH cross-trading or “crypto-to-crypto” trading.
Choose Your Exchanges Wisely
Don’t give your business to any crypto exchange, especially if you are a novice trader.
There are hundreds of different cryptocurrencies and exchanges to choose from. That said, not all of them are created equal, and it would be wise for novice traders to avoid those that are not reputable.
When choosing an exchange, look for one that has a good selection of altcoins (alternative cryptocurrencies) as well as Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Ripple (XRP). The exchange should also have sufficient liquidity in the coin(s) you wish to trade.
The more popular the cryptocurrency you wish to invest in, the easier it will be for you to find an exchange that offers trading with them. Consider how long the exchange has been around before opening an account; longer track records mean less risk of potential scams or other issues down the road.
Get to Know Some of the Best Crypto Tools
As a cryptocurrency trader, it’s necessary to keep an eye on the market. There are many trading tools that can help you track the market, your portfolio, and even trade more effectively.
CryptoTrader.Tax: This is an accounting tool that helps you keep a record of your trades and calculate capital gains and losses for tax purposes. Capital gains taxes are a bit different in crypto so getting familiar with this is important if you want to be a smart trader.
Coinigy: This tool lets you view the markets on one platform to help make better trading decisions. It features over 75 exchanges across nearly 40 countries, and it covers all top cryptocurrencies (including Bitcoin). You can also perform technical analysis via charts from TradingView and get notifications about price movements through alerts or your mobile device (e.g., iPhone or Android).
Coin ticker: This app provides real-time quotes for cryptocurrencies, including Bitcoin and Ethereum, among others.
Stay Up to Date with Crypto News
In order to make good trading decisions, it’s important to stay up to date with the latest crypto news. You can do this by using Google News and Twitter, which allow you to browse for current news articles about cryptocurrency.
Additionally, Reddit and Telegram are great resources for staying up to date on relevant discussions and events. Finally, Google Trends can be a helpful tool in determining what topics people are searching for all over the world. By keeping track of all these resources, you’ll always have access to the most current information on cryptocurrencies.
Cryptocurrency is the Future of Money and an Absolute Way to Make Money
Cryptocurrency is the future of money and a very real way to make money. Cryptocurrency is a type of digital currency that uses cryptography to secure transactions and control the creation of new currency units. Many different types of cryptocurrency exist, such as Bitcoin, Ethereum, Ripple, Litecoin, and Tron. Cryptocurrencies are traded on cryptocurrency exchanges where users can sell or buy them using traditional fiat currencies such as US dollars or Euros.
You can trade cryptocurrency for profit using two methods: (1) Day trading; or (2) Buying and holding for long-term gains.