Crypto is a currency that comes with a multiplicity of amazing and exciting new features, but it is, at the end of the day, still trading. You can be good at trading, and you can be bad at trading, but if you want to be a better trader, there is a wealth of research as you can learn from the entire history of trading. Some tips from stock trading don’t apply, but many do – so if you want to be a better trader of crypto, make sure you learn from the following time-tested lessons:
Portfolios are called portfolios for a reason – you need different assets in there. If all the money you are investing is in one cryptocurrency, you are putting your whole investment fund at risk. Even though Bitcoin is the biggest cryptocurrency, that doesn’t mean that a market shock could specifically cause Bitcoin bears to be vindicated. Who knows if the SEC is going to suddenly make a ruling that shocks the entire world of Bitcoin but not Ethereum? To protect yourself from market shocks, you simply need to diversify your portfolio. Don’t put all your eggs in one basket.
2. Stay as Alert and as Aware as Possible
You will have confirmation bias; you’re human. Confirmation bias will manifest by you only noticing the promising news about your chosen cryptos and not the negative. This can lead to you making misplaced decisions, mistakes, and at the end of the day losing money. You should constantly be trying to learn as much as possible – use reliable information sources, compare your cryptos to other world currencies, subscribe to some crypto trading signals, seek to learn as much as you can as often as possible.
3. Make sure You Use Your Own Money
Due to the promise of rallying currencies, many people have been borrowing money from their banks to invest in crypto – don’t do this – you never know when there’s going to be a sudden drop in price that can stop you from making your repayments and that will impact your credit score and make your life harder. Instead of thinking about all the money that you could make by taking out a substantial loan and investing it in Bitcoin, think of everything you have to lose if you do that, and then suddenly, the Dollar spikes and cryptos all crash.
4. Don’t Overleverage Yourself
This falls hand in hand with the last point – there are many different options that you can take, borrowing money from a broker instead of a bank. Leveraged accounts allow for bigger gains but even bigger losses, depending on the margin. You can leverage yourself a bit if you know what you are doing, but never overleverage yourself – always have a good awareness of your risk threshold, and when you have made your target profit, you should always take it.
5. Have Fixed Rules in Place
You should always know when you are going to buy and when you are going to sell. Stick to these rules always. Having them will stop you from making impulsive, emotional decisions.