Bitcoin has become one of the most popular coins in cryptocurrency trading within the past decade. Since its debut in 2009, this digital asset has had an exponential increase in value over the years. Although this cryptocurrency has been accumulating a ton of traction, beginners to bitcoin trading need to approach it with caution because it is highly volatile.
The value of bitcoin and cryptocurrency is largely determined by supply and demand. The entire market is predicated on speculation. Investors make their bets on if prices would go up or go down to make profits. These speculative bets will cause a sudden and dramatic influx or outgo of money.
This might be intimidating to beginners of crypto-trading, but don’t let it scare you away. Here are 10 tips to help you navigate the crypto-sphere:
1. Research the Market
In order to be a successful bitcoin trader is to do your homework. Make sure to research the market before you start investing in it. Since the crypto market tends to be volatile, it’s recommended to research as much as possible.
Researching bitcoin is not as straightforward as evaluating other financial markets. A great starting point is reading articles, checking online forums, and watching vlogs discussing cryptos. This will allow you to broaden your mind and see the possibilities of the potential of blockchain technology. Here are 10 of the best research tools you can use.
2. Start Small
Invest small amounts of money when you first start out. We all know the saying, “never put all your eggs in one basket”. It applies to investing as well. As the cryptocurrency market is extremely volatile, it’s smart to start small. And pick only one type of cryptocurrency and stick to it until you feel confident enough to go bigger.
3. Pick a Secure Wallet
Cryptocurrency can be stored in both an online and offline wallet. For new investors, an online wallet is best. However, it runs the risk of being hacked. Read up on both wallets and choose one that best suits you.
There are two types of wallets:
- Hot wallets are connected to the internet and subsequently open to hackers
- Cold wallets store your assets offline and are generally considered more secure
Here is a list of crypto wallets you can research and compare to find the best fit for you.
4. Have a Clear Plan
As mentioned, bitcoin is unpredictably volatile, so it’s vital to have a plan and stick to it. Before opening a position, consider what level of profit you would be happy to take from the trade, what losses you can afford to shoulder, and set your target and stop-loss levels right from the start.
Many beginner traders fall victim to greed, holding on to a position for further profit only to see prices plummet, whilst others optimistically convince themselves that a downward trend will reverse as they fall deeper into the loss zone.
5. Find Your Strategy
Before you even think about opening a position, you should put careful thought into the type of trader you want to be. There are four main strategies that are popular among the bitcoin community: Scalpers are the most active, making multiple trades per day for small profits.
- Day traders enter and exit the market within 24 hours, taking advantage of short-term market movements.
- Swing trading, which is based on in-depth technical analysis to capture trends in the market.
- Passive trader, holding on to your positions with a focus on long-term profit.
6. Watch out for Scammers
Altcoins are very tempting, but remember that the cryptocurrency world received an enormous amount of attention, which brought many scammers into the field. Learn how to identify crypto scams. Unfortunately, there are plenty of them around. Many entrepreneurs want your funds; not all of them want them for the right reasons.
7. Risk Management
To be a profitable trader, you never look for the edge of the movement. You look for the small gains that will accumulate into a big one. Manage risk wisely across your portfolio. For example, you should never invest more than a small percentage of your portfolio in a non-liquid (very high risk) market. To those positions we will assign greater tolerance; the stop and target levels will be chosen far from the buying level.
8. Diversify Your Portfolio
Diversification can also boost your profits in good market conditions. If you’ve invested wisely, you could well find yourself holding multiple assets of high value.
It’s important not to over dilute your portfolio, though. You still need to assign a worthwhile amount of capital to each trade. Find a balance that reasonably increases your profit potential whilst simultaneously minimizing your exposure in any one cryptocurrency.
9. Invest Only What You’re Willing to Lose
Bitcoin is not the money fairy or a magic dollar printer. Don't put yourself into debt on a gamble or investment. All your money can turn into nothing overnight at the hands of a few big players. Play it safe and invest only what you’re willing to lose.
10. Find a Reliable News Outlet
There are plenty of crypto sites in the market that can provide you with recent news. But, it is essential to find the most authentic source. If you are also in search of such reliable and credible sources, check out this article.
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