If you are new to the world of cryptocurrencies and the crypto space in general.
Here are five essential tips for trading cryptocurrencies.
1- You should enter the crypto market with a defined plan
2- Define your investment strategy
3- Consider the risks of the crypto market
4- The cryptocurrency market is not a wealth paradise
5- The type of your portfolio with different cryptocurrencies
So that you do not fall prey easily in this vast world.
We will discuss each tip in detail.
Currently, there are thousands of cryptocurrencies with different characteristics, many of which are illiquid and therefore more risky. While fewer of these cryptocurrencies are closer to betting than investing. Meanwhile, there are cryptocurrencies that are highly liquid and suitable for ownership and investment in the medium and long term.
The important thing will be to choose the asset you want to continue with and invest or speculate in. Every investor has a different profile or nature, which involves their way of dealing with and understanding the market and their goals for trading or investing currency. Therefore, it is important to determine the maximum loss tolerance to measure the risks you are willing to take. It is also essential to define time horizons and ask questions like:
Should I invest in the very short term? Or in the medium term? Or in the long term?
Example:
In a certain investor profile who does not work full-time monitoring their investment, it is better, for example, to prefer the medium/long term to avoid strong short-term fluctuations (days/weeks).
2- Define your investment strategy
Based on your previously mentioned profile, it is important to determine your ability to analyze projects and research their fundamentals, then choose an effective investment strategy. The most important point to consider is knowing the basics of money management. Therefore, it is important to answer some questions before proceeding and investing in the cryptocurrency market:
What is my current financial situation?
What are my time horizons, and does it allow me to sit in front of the screen for long periods?
What extreme movements can I expect during this period?
What would be the ideal distribution among cryptocurrencies of different sizes?
Is the trend of more liquid cryptocurrencies better? Or less liquid?
According to these criteria, it is important to choose an optimal money management strategy. The most important thing is also to get your trends, especially for beginners. You should also invest gradually in the crypto market. Gaining experience over time is extremely important as it allows you to reduce the risks that remain high with a lack of experience. To increase your experience in the crypto market, regular monitoring of the market, books, records, and websites is necessary.
It is better to be cautious when moving in the cryptocurrency market, and attention should be paid to the impact of leverage and other tools that are considered advanced for beginners in the crypto space, etc. Engaging in the crypto market will allow you to improve your strategy as much as possible over time.
3- Consider the risks of the crypto market
When investing in the crypto market, caution should be exercised, and the phrase "what is invested in the crypto market can be completely lost" should be taken as a motto. This phrase should always be remembered, so even if the investment amount is entirely lost, it does not harm you, as you would be aware of it and allocate only what you can afford to lose. Adhering to this rule is a matter of safety.
4- The cryptocurrency market is not a wealth paradise
Since cryptocurrencies have created a very large number of wealthy individuals, the promises of extremely rapid wealth have become very numerous, and there are many offers claiming to make you rich in a short time using cryptocurrencies.
Here, caution is required, and it is important to know that a good deal that comes to you dressed in an ideal form is usually never a good deal. Beware of sites that convey the idea that your investments in crypto will make you rich quickly. Do not hesitate to refer to the blacklist of significant crypto projects to understand the risks surrounding the market.
Although short-term trading is often pitched as a quick way to get rich, for the inexperienced, it is one of the riskiest methods. Doubling positions without sufficient skills leads to systematically doubling risks.
5- The type of your portfolio with different cryptocurrencies
As we mentioned at the beginning of the article, every cryptocurrency has specific characteristics, some of which are liquid, some have high volatility, and some are meme-based.
As an example, Ethereum is one of the most liquid cryptocurrencies, which also offers high performance compared to its valuation. Bitcoin also remains one of the largest highly liquid cryptocurrencies, offering particularly interesting annual performance. It is essential to clearly distinguish between utility cryptocurrencies (BTC and ETH, etc.) and pure speculative tokens.
Depending on these parameters, you will need to ensure proper diversification of your portfolio, which will be one of the pillars of your strategy. It is often interesting to mix highly liquid and safer crypto assets with less liquid assets and long-term cryptocurrencies. In addition to the aforementioned tips, it is also important to choose a trustworthy trading platform with high liquidity. There are indeed many reliable platforms such as Binance, Coinbase, and Kraken; these are just examples and not recommendations, as they feature high liquidity that allows users to trade quickly, along with relatively better security compared to other trading platforms and support for many cryptocurrencies.
Finally, we wish good luck to every newcomer who works with confidence and calm nerves, taking into account the surrounding circumstances of trading and not getting carried away by false indicators, and ensuring that trading is done with complete conviction. Good luck to you all.
