Welcome to the world of crypto trading. Before we begin, let’s have a quick look at what cryptocurrency is. Cryptocurrency is a digital asset that can get used as a medium of exchange using blockchain technology. Blockchain is a decentralized network of computers that keeps track of all transactions and can verify them without a central authority or third party providing trust.
Should retail investors be jumping into crypto trading right away? Our answer will surprise you! We’re going to share our two cents worth on this topic after looking at some real-life examples below.
How to Make Your Crypto Trading Strategy?
It is a good practice to keep track of your trading activity.
If you are confident in the crypto assets you have chosen, it is advisable to keep them in your portfolio. Diversification is not only about the number of assets but also about trading strategies.
If you want to understand how cryptocurrencies work, imagine the following example. A friend asks you if they can borrow your car so they can drive their friend home from work (since their car is broken).
You agree and tell them where your garage key is so they can get in and start up the engine before going off on their adventure. But wait’what if your friend decides not to return?
Do you have any way of knowing whether or not he’ll give it back? What if he has lost his keys? Or maybe somebody stole them from him’or worse yet. Maybe someone got into his house while he was sleeping last night and stole both his keys and his wallet with all its contents!
So, it is essential to evaluate the pros and cons of the situation before diving into anything.
The same goes with your investments to seek value from the cryptocurrency markets. You may get lured by the appreciating cryptocurrency prices. However, if you are looking to create cryptocurrency value that you can reap over the years, you have to have a strategy in place.
Being Aware of the Risks
Investing in the crypto market is risky, which means that you should get prepared to lose some or all of your investment.
You can never predict the future of any market and its value will fluctuate based on several factors. It can include
- The markets perception of the coin’s utility
- Its popularity among investors
- Technological advancements
- New developments in its code.
Make sure you do thorough research before investing. This way you know what you are getting yourself into. What risks are involved, and how much you can afford to lose if things don’t go as planned.
Keeping It Simple
As you start in the crypto market, you need to keep things simple. You will find that most professional traders and investors have the same strategy: they only trade when they see a clear signal. Many traders make money by simply following this rule.
For example, say someone wants to buy Bitcoin (BTC). They shouldn’t think about how much fiat currency they have in their bank account and then decide whether or not they can afford 1 BTC.
They should ask themselves what kind of signal indicates that now is a good time for investment in BTC? The answer may be different depending on which type of investor you are’a short-term or long-term one. However, regardless of which type you are, there should always be an indicator telling us when we can buy bitcoin rather than blindly buying it at any price just because we think it’s going up every day!
Developing a Plan for Every Trade
Determining risk and reward. When making trades, you need to keep in mind the amount of money you’re willing to lose on each trade. You should also have a system of determining whether or not a given trade is worth taking.
Set stop-loss orders. If your stop-loss order is too low, then it may mean that your account will get wiped out if the price goes against you. If your stop-loss order is too high, it could take longer for you to reach your desired profit level. In either case, having too little or too much money tied up in an unprofitable position increases risk and reduces the chances of making profits in other positions.
Diversify
The most important rule of investing is to ”’don’t put all your eggs in one basket”
. That is, don’t put all your money into a single cryptocurrency or type of coin.
You may have heard the saying, ”’Don’t put all your eggs in one basket”
. If something happens to that specific investment, you will lose everything! You must diversify across different coins and exchanges so that if one goes down, it won’t take everything with it!
One way to diversify across coins is by using an aggregator like OKX. It allows users the ability to sort by market cap or name. The larger the number next to any given coin indicates its total value relative compared against other cryptocurrencies out there on exchanges worldwide. However, keep in mind that these numbers can change drastically based on current prices).
Take Care of Your Funds
A good trading strategy will help you take care of your funds. At the same time, it is a useful tool to deal with the emotional part of trading. It means that you should be able to stay calm and focused to make good decisions when needed, especially during periods of uncertainty or volatility.
If you can’t find an easy way out of this situation, your strategy needs more work before it’s ready for real-life scenarios. In general, though, I would advise against using complex strategies if they’re not something that comes naturally to you. It is especially difficult because they require constant monitoring (and possibly adjustments) throughout the day or week.
Conclusion
In conclusion, it is important to understand what kind of trading strategy you are implementing. There are various types of cryptocurrency trading strategies, and they all have their pros and cons.
It’s up to you to decide which one suits your goals best. You can also try several strategies at once if that is more suitable for your needs and preferences. Remember not to be greedy as this will lead you into losing money in the long run!