There is a very unwise way to trade cryptocurrencies that can quickly erode your profits. So, take your time to learn and avoid common mistakes. When trading cryptocurrencies, you should never do these three things:
1. Never buy when prices are rising. Remember: be greedy when others are fearful, and fearful when others are greedy. Make it a habit to buy when prices are falling.
2. Never use leverage. Leverage increases risk and can wipe out your capital quickly.
3. Never go all-in. Going all-in makes you too passive, and the market always presents new opportunities. The opportunity cost of committing all your funds at once can be very high.
Additionally, here are six important rules for short-term cryptocurrency trading:
1. After the price consolidates at a high level, it usually reaches a new high. Similarly, after consolidating at a low level, it often hits a new low. So, wait until the trend direction becomes clear before making a move.
2. Avoid trading during sideways or choppy markets. Most traders lose money because they ignore this simple rule.
3. When analyzing candlesticks, buy on bearish candlesticks in the daily chart and sell on bullish candlesticks.
4. When a downtrend slows, the rebound will be slow; when the downtrend accelerates, the rebound will also accelerate.
5. Build your positions gradually using the pyramid buying method—this is a timeless principle of value investing.
6. When a cryptocurrency has been rising or falling continuously, it will eventually enter a sideways phase. During this consolidation, avoid selling everything at high prices or buying everything at low prices. Wait for a clear trend change. If the trend shifts downward from a high level, exit your positions promptly. Timely action is crucial.
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