If you are a newbie in the world of crypto trading, there is no reason to panic. Investing in cryptos is not rocket science, but, at the same time, you cannot disregard the risks. As a new trader, you will make mistakes and you grow by learning from them. The crypto market may be open 24×7 but it will not follow traditional financial norms and regulations. So, if you are a beginner, take it slow, and follow these important rules of crypto trading:
- Forget the hype: To start with, you need to stay away from the hype and ignore the “noise”. While the hype may be what drew you to cryptocurrencies in the first place, you must understand that making trade decisions based on what others are speculating can land you in trouble. Critics will keep arguing that cryptos are only a fad and the Bitcoin bubble will soon burst. However, you need to believe in your assets and hold onto these to earn profits.
- Prepare for volatility: The crypto market is notoriously unpredictable and volatile with prices of assets swinging dramatically. Experienced trades are already accustomed to this phenomenon but newcomer may feel nervous and scared. To be a smart crypto trader you must be prepared for unprecedented and unfavorable situations. You cannot let your emotions get the better of you or influence you to make hasty and impulsive decisions.
- Stick to a plan: It is essential for a beginner in crypto trading to have a proper trading plan in place. Most newcomers tend to become victims of the infamous “pump-and-dump” schemes meant for duping unsuspecting investors. Certain “gurus” or social media communities claim to offer you valuable trading tips about specific assets. These are to be avoided at all costs because you will probably end up losing more than you ever imagined.
- Be diligent: There is no substitute for research. Before investing in any coin, it is imperative to read its whitepaper thoroughly. There are plenty of resources out there for you to get information about a coin. So, as a savvy trader, you have to do background research to be prepared well. When you are unable to find much information or whitepaper about a coin, it is probably better to choose another crypto.
- Diversify your assets: If you wish to be successful as a crypto trader, you must spread your money across different types of investments. Cryptos should only constitute about 5%-10% of your entire investment portfolio. Even amongst cryptos, you should choose to buy some other assets apart from the Bitcoin. This will ensure that the losses you suffer when Bitcoin crashes will be compensated by gains you made through other coins.
- Choose wallets carefully: Storing cryptos securely is an important task for any trader; more so, for newcomers. You should understand the features and differences between cold and hot wallets. Hot wallets operate online, and are therefore vulnerable to security threats. Cold wallets offer offline storage and are relatively safer when it comes to storing a lot of funds. Keeping your coins on an exchange may be convenient but not safe because exchanges have been hacked in the past.
- Choose a trusted platform: For a beginner, it is equally important to choose a reliable trading platform. It is best to select one that asks for KYC documents and ID verification. This tells you that the exchange values privacy and prioritizes security.
Following these rules will help you learn the ropes faster and make successful trades.