The term “crypto trading” or “cryptocurrency trading” refers to betting on price fluctuations of cryptocurrencies using a contract for difference (CFD) trading account or buying and reselling the underlying coins on an exchange. For instance, CFD trading lets you speculate on Bitcoin’s (BTC) price fluctuations without holding the underlying asset.
The cryptocurrency market’s rapid gains appear alluring. However, it might be difficult for traders to ignore abrupt trend reversals in cryptocurrencies. As a result, a solid crypto trading platform is essential for traders to avoid making rash judgments that might end up costing them a lot of money.
The standard investing options for investors have always included stocks, bonds, commodities, and currencies. However, the new field for market participants, particularly day traders, is bitcoin trading. Short-term traders are frequently drawn in by the energy and volatility that the crypto market binds in. However, this volatility is likely to yield considerable rewards shortly since popular digital cryptocurrencies have shocked market players with a tremendous return.
Also Read: How to Start Investing in Cryptocurrency in 7 Easy Steps
6 Best Tips to Master Cryptocurrency Trading
It’s possible that 2022 may turn out to be one of the most critical years for the cryptocurrency sector. Given this background, the following guidance is offered to investors who are wishing to maximize their cryptocurrency trading profits:
1. Pay attention to currencies with high liquidity
Although dozens of cryptocurrencies have been created and listed on the Best crypto exchange, due to a lack of liquidity, not all of them make for viable trading possibilities. However, due to liquidity—a crucial element—short-term traders can quickly enter and exit a position.
The limited liquidity of some cryptocurrencies constrains this trading agility. This makes it challenging to enter and leave a crucial crypto trading position. Additionally, liquidity impacts the effect cost, increasing the overall trading cost. A trader must therefore trade these cryptocurrencies where there is already a significant amount of activity.
2. Trade But Don’t Bet
One thing that both trading and gambling have in common is that the outcomes are uncertain. One lays a stake and waits for the outcome on both playing grounds. However, risk management is what divides a trader from a gambler. Digital currency purchases made without considering the danger are equivalent to betting.
Cryptocurrency can be considered as the very definition of volatility. As a result, there is significantly more uncertainty with cryptocurrencies than with any other reliable security. Therefore, bitcoin traders need a robust risk management plan. For instance, it might seem wise for a trader to use stop-loss orders and only bet an amount they are willing to lose on the deal.
3. Buy Strength and Get Rid of Weaknesses:
In contrast to conventional financial assets, cryptocurrencies do not have any asset backing their worth, on a fundamental level. This is because the highs and lows of a cryptocurrency are so unpredictable.
Trading in such circumstances can involve buying a solid uptrend and selling a decline. Cryptocurrencies also can stay in an overbought or oversold region for a considerable amount of time, which cannot be ignored. To avoid losing money when trading cryptocurrencies, one should exercise prudence when placing mean reversion bets.
4. Do not purchase coins only because they are inexpensive
Most newbies make the same mistake: they buy a currency because it seems affordable or falls within their pricing range. For instance, consider someone who decides to utilize Ripple rather than Ethereum because the latter is much cheaper.
Instead of considering a coin’s affordability, investors should focus more on its market size. Cryptocurrencies are measured by their market capitalization, computed using the formula Current Market Price multiplied by Total Number of Outstanding Cryptocurrencies. This concept also applies to conventional equities.
There is no difference between a coin valued at $100 with 100,000 shares in the market and a coin valued at $10 per coin with a total of 1 million shares in the market. Therefore, it makes more sense to base investing choices on a coin’s market capitalization than its price. A cryptocurrency is more suitable for investment if its market value is higher.
5. Do Your Research Before Investing in Cheap Cryptos
Cheaper crypto assets have attracted a lot of interest from novice traders in the crypto industry. The absolute percentage gain takes center stage as the value of these coins increases. Frequently, traders are attracted by these enticing profits and purchase these assets in bulk without completing sufficient research.
Traders must understand that the cheapest cryptocurrency is not necessarily the best choice. As a result, a cryptocurrency trader must conduct extensive due research before investing in such assets. Traders may also search for cryptocurrency assets that have an actual probability of gaining a user base in the future.
Trading platforms with reasonable processing costs are what investors should seek out rather than the cheapest cryptocurrencies to make cryptocurrency trading more economical. In addition, searching for trading platforms that don’t penalize consumers for converting their native money to a digital one is an additional choice.
6. Manage Your Emotions
Even with a strong trading strategy, dominant emotions like fear and greed can change the results drastically. Such emotions become more intense when a trader experiences large swings in his profit and loss account, which is not uncommon when dealing with crypto assets undergoing their erratic movements.
Trading psychology seems critical for traders who want to succeed in the crypto market while controlling their greed and stress. Traders must also possess the self-control to adhere to their trading techniques and understand when to register profits and losses.