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Basic Cryptocurrency Trading Tips For Beginners

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Here you will find useful tips for cryptocurrency trading

Here you will find useful tips for cryptocurrency trading

It is important to note that trading is different from investing. Trading means you are trading in and out of a cryptocurrency, sometimes within minutes or hours. Traders usually play the price swings of different cryptocurrencies.

1. Every trade must have a reason

It is very easy to make a trade simply because you are bored, or believe that you should trade regularly.

Every single trade you are looking to enter must have a solid reason behind it. Do not trade for the sake of trading. Remember each trade can make and lose money and each trade costs you fees to enter.

2. Don’t overtrade

It is tempting to FOMO (fear of missing out) into multiple trades a day and to constantly enter new trades.

The best traders know when to trade and when to wait for a trade setup.

3. Take time out

Sometimes the best trade is no trade at all.

Taking time out is especially important if you find yourself in multiple losing trades. STOP, and re-evaluate your trades and see what went wrong and how you can improve your trading strategy.

In crypto this is very important, even a good coin can have a bad day or week if the entire crypto market is moving in a downtrend.

4. Take profits

Learn to take profits along the way, or at least protect your initial investment (money you put into the trade) is important.

Before entering any trade you must know when you will start taking money off the table, or when you will take profits. Remember you can always re-enter a trade again if you believe it will run higher.

The usual rule of thumb in Crypto is to take your initial investment out once a trade has 1-3x and then you can let the rest ride with a trailing stop loss.

5. FOMO

FOMO means ‘Fear of missing out’ and however disciplined you are it is very easy to do.

Cryptocurrencies are very volatile and thus can see hundreds of percent moves in a day.

It is very common for new traders to see a coin go up 50% and FOMO into this trade as well. More often than not the trader will lose.

Some experienced traders know how FOMO trades work and can make great short-term profits, but it is best to wait for the coin to correct and buy the dip, or to just admit you missed the move and look for another one.

Leave FOMO trades to day traders.

6. Volume

Volume is very important if you are trading cryptocurrencies.

You may see a token rise 100% in an hour and you want to trade it. The first thing you must look at is the volume! Always make sure there is decent volume, ideally a few million dollars at least.

7. Risk management and profit taking

Always manage your risk!

Do not go all-in on one trade and take profits often.

Remember there is always another trade around the corner and it is never wrong to take some profit.

8. Know your coins

Crypto traders that are consistently profitable usually only trade a select group of coins and they trade the support and resistance levels. They become experts in the movement of only a few coins and play the swings.

It is also important to know any developments in your coins that may affect the price, just as you would a stock.

For example

A main net release or a new exchange listing can move a coin up. A token release increase will flood the market with new tokens and so affect the price.

9. Watch Bitcoin

Watch the price of bitcoin. At the moment (2021) if bitcoin drops usually altcoins drop too, the same goes for if bitcoin goes up so do the alts.

10. Price of the coin

Many beginners see a 10 cent coin and a $1 coin and decide to trade the 10 cent coin as it is cheaper. Do your research as to why this coin is cheaper. Usually, it is to do with the token supply or the value of the company (market cap)

11. New project verses old projects

New, fresh promising projects usually attract traders as they can trade the enthusiasm. Stale and old projects that have not accomplished much are cheap for a reason.

You can look for new crypto projects that have just gone live on exchanges and trade those.

Visit this page to see newly listed cryptocurrency projects

Pro Tip

However good a new project is if it comes out onto the exchanges during a rough crypto month (the overall market is down) it will often not run up as much as if it had come out in a green (upward) market. This presents smart traders with an opportunity. They can find a solid price entry and wait for the crypto market to turn green again (usually a few days or weeks) and gain nice profits from getting into a solid project when others were fearful.

12. Diversify

Do not have all your eggs in one basket and do your research. Choose a few solid projects for your core positions and then allocate a smaller percentage for your day trading.

Pro tip

Experienced traders play the swings in their favourite coins and take profits. Over time you can accumulate more of a certain coin as you play the swings and add to your long-term core positions using swing trading profits.

13. Exchange fees

Different exchanges charge different fees to trade. Learn the cheapest methods available to trade your chosen crypto token or coin. Fees add up over time.

14. Limits orders, not market orders

If you are looking to trade use limit orders and not market orders.

A limit order is where you enter a price you are willing to pay for your trades, a market order will execute your sell or buy order at market price and increases slippage.

Some exchanges also charge lower fees for limit orders and higher fees for market orders.

15. Avoid margin trading

It is very tempting to margin trade, but if the trade goes against you the losses can be very high and completely wipe out your funds.

16. Long and short leverage trading

This is a safer method to leverage your trading position than margining trading as you will only lose the entire amount you put into a trade.

You can choose to execute a simple long/short trade or you may want to 5x 10x 50x 100x your position. The higher the X, the higher the reward, and also the more accurate you need to be that the direction of your trade is correct.

If you 100x a trade your liquidation price will be very close to your purchase price if your trade goes against you it may only take a small percentage move to liquidate your position completely.

17. Crypto trading taxes

Some countries like the United States tax every trade you do. Some countries tax short-term trading at a higher rate than long-term trading like 6 months or a year.

Know your tax liabilities and cost these into your trades.

18. Ladder in and out of trades

Learn to ladder in and out of your crypto trades. Set multiple buy or sell orders rather than buy or sell in one chunk.

19. Crypto never sleeps, but you have to

Unlike the stock market the crypto market never stops, it trades 24/7 globally. Before going to sleep if you are still in a trade consider setting limit orders, stops, and even using trading bots to trade for you.

20. Learn basic charting and TA (Technical Analysis)

Learn the basics of price movement, volume, trends, support, and resistance.

21. Keep some cash reserves

There is nothing worse than seeing a great trade and having all your money already deployed and thus missing out on a golden opportunity.

Always keep a certain amount of your portfolio in cash using stable coins or fiat.

This is especially important with crypto as the market can without warning drop 20% in one day and those that have cash reserves often buy the dip.

22. Understand trends

This goes for not only the overall market trend (up/down) in the short-term and long-term but also when a certain trend like NFT’s or DeFi for example is about to enter a trend up or finish a trend cycle.

23. Stack sats

Many traders will trade the swings in bitcoin to gain satoshi’s. The idea is to learn to value all alts in satoshi’s and not only the USD price.

Some traders play the altcoins to accumulate more satoshi’s (bitcoin) when they sell out.

24. Watch the order book

On an exchange you will see the buy and sell orders, keep an eye on these as they affect the token you are trading.

25. Be careful which token you trade

On some decentralised exchanges it is possible for anyone to create a fake token that is very similar to a legitimate token. This means you must be very careful you are buying the token you want and not a fake token.

Pro tip

New “hot” tokens or IDO’s when they go on Uniswap or pancake swap can have scammers trying to trick you into buying their version of the token, i.e not the real one.

Use https://www.dextools.io/ as a means to double check you are trading the correct token.

26. Know when to take a loss or reduce a position

Sometimes a position we really believed in goes against us. This is life, do the math, if it no longer adds up think of reducing your position or even cutting out completely and re-deploying what’s left into a better cryptocurrency.

27. Learn Stablecoins

If you are trading in and out you must know how to use Stablecoins to protect your profits.

We wish you the best of luck with your cryptocurrency trading!

If you would like help with your trading or TA analysis please visit our crypto consulting services.