Crypto trading, just like any other type of trading, requires some rules and regulations people need to follow. Without such rules, making Bitcoin profit may be a challenge or even impossible. The following is a list of five main rules of crypto trading explained.
Invest what you can afford to lose
Hobby-investors made a loss in the recent crash of January 2018. To avoid such a loss, consider your money lost the moment it is converted to cryptocurrency. Losses should not be considered to originate from market dips. They can be caused by other factors such as regulations, bugs, and hacks.
Take a step back if the money you are investing is beyond your means. Re-evaluate your financial situation to determine the amount of money you are ready to lose. For example, avoid investing in cryptocurrency using loans, sale from household items, mortgages, or credit cards.
Bitcoin should be your guide
During the Asian financial crisis, many altcoins (all other cryptocurrencies) were more closely pegged to Bitcoin than how USD was paired to Asian currencies. If Bitcoin prices rise drastically, altcoins are likely to dip due to the surge of people trying to ride Bitcoin profits. When Bitcoin dumps drastically, altcoins can also go down as people dump their coins. This means Bitcoins should be your guide for trading other cryptocurrencies.
The potential of earning or losing is magnified by the amount you invest. The most effective way to capture the overall cryptocurrency growth is to reap and diversify growth of a variety of coins. This can be done by checking a few facts on some of the coins onthe market.
For example, Bitcoin has increased by 34X, while Verge and Corgicoin haveincreased by 60,000x and 13,000x respectively. All this happened between January 2016 and January 2018. Of course,you would have managed impressive gains during the same period with Bitcoin. However, expanding to other coins would have increased your gains.
Don’t be greedy
You will never lose money taking profit. However, the greed inside you is likely to increase with the growth of the coin. You may have goals of growth of between 40% and 50%. Take note it may be wise to take profit when growth is at a lower level, let’s say something like 30%.
There is a risk of losing profit when you try to take profit at a higher point or you wait too long. If the coin dumps, you may end up losing the profit and even your initial investment. A good habit is scouting for re-entry after taking profit as this will ensure you continue reaping potential gains.
Avoid blind investments
There are brokers who would sell you anything just to make a profit. They will claim a coin is about to moon so that they can exit once the prices have increased. As a good investor, do your research. The move will ensure you are fully responsible for any potential investment outcome. Information from the most productive investors is great but should never be taken as a promise.