Bitcoin will do to the banks what email did to the postal industry, said Rick Falkvinge. Yes, we are certainly seeing gigantic moves in the cryptocurrency market these days. As we are waiting for Facebook to launch its long-awaited Libra (now Diem) digital currency, Bitcoin is skyrocketing like never before. Currency revolution is heavily speculated and we all want to see what’s behind the facade. Where is the crypto market headed in the long run and what impact is it going to have on the world? What’s the big picture and how can we ride this massive wave that is happening as you read these words? Stay tuned as we start a series of articles on crypto trading, providing objective facts and key advice that you can immediately apply in trading.
They say it is not important when you enter the market as long as you forever maintain the buy-and-hold mindset. What we don’t want is instant gratification compulsion, especially now when the market is moving erratically. Money management and trading psychology will prevent you from interfering with your trades, collecting profit prematurely, and taking major losses. If you are new to crypto trading, following these essential tips will make a significant difference in the short and long term. In this market, the upside is extraordinary, while the downside is limited. Therefore, let’s see what steps you can take to make the most of it.
Luckily, we can now go both long and short and crypto already has an inherent upside that we can benefit from immediately. We need to see if we are in a buyer’s or seller’s market and determine where we can make the most profit. Still – and this is imperative now more than ever before – we can always make a mistake in our estimations. That is why we absolutely never go all in. And, equally importantly, we never give in to the market’s community hype, fortifying our sense of independence and self-reliance. The key is to make smart money and, to do so, the best strategy is to spread out. Diversify your coins and that way, even if something falls through, you will always be safe. This also means that you will not overleveraged and, thus, take a smaller (5-15%) fraction of the entire portfolio to hold crypto.
Always come up with a plan and make sure you stick to it. Keep your anxiety and other emotions aside and set key points ahead. Determine your stop-loss and take-profit, and then move your stop-loss to break-even when it gets there if you want to scale out. Scaling in and cost averaging can be something you can apply but then you would need more attention and research. Rely solely on your system to tell you when the right time to make a move comes and do not deviate from the initial plan. Additionally, besides the daily chart, you can also use the weekly and the monthly ones for long-term trading. Just remember not to let the fear of missing out get the best of you, especially in the midst of this crypto craze.
Holding is used by the richest traders on the globe, who know how to allot their investments to reap benefits continuously. Allocate 70% of your finances to long-term buy and hold and 30% to your short, more aggressive trading strategy. Then, decide how you are going to spread out to ensure risk is reduced. For example, you can have the majority of investment in commodity stablecoins as a protection in case everything else falls apart. The second in line could be bitcoin or ETH or, preferably, both. Next, 5—20% could be distributed across different altcoins. Your final layer should be your longshots or the coins you use for your long-term strategy.
With crypto, we may not know exactly when the best time to start trading is. However, if you do feel that something is to go up, crypto’s upside and downside ratio allow you to invest your money more freely than in other markets. You can also use Trailing Buy, which helps us determine entry signals. To enter a new trade, move the trailing line down only if the price goes lower than it is right now (i.e. if it breaks down upon the candle close). When the price finally hits the trailing stop, you are getting the green light to buy.
Whether a trade renders great results or not, you need to set a defined exit strategy. Like in any other market, you need to align your exit point with your overall strategy; hence, your exit strategy is going to vary depending on the type of trade. You must maintain consistency and refrain from making any changes in the middle of a trade. As cryptocurrencies are great for holding, your exit will then be contingent upon your idea of how long that trade should last. As long as you have a projection of how far you want to go, you will know exactly where you want to take your money off.
Staking is an excellent way to make passive income in the crypto market while holding them at the same time. This strategy implies that you hold some coins (keep them in a crypto wallet) and, therefore, strengthen the network for which you get a reward in the form of extra tokens. While not all cryptocurrencies permit this, the Proof-of-Stake mechanism requires that certain coins’ new blocks be verified by staking after production. What is important is that you can earn additional income when the coin you hold increases in value. Some blockchains have predefined minimum and maximum staking periods that basically determine the span during which you can retrieve your coins. To avoid dealing with all these requirements, traders prefer to delegate their coins to a validator (traders who stake their coins) running a staking pool. It is, however, important to mention that validators lose a portion of their stake if they double-sign or attempt to attack the network.
Since crypto is known to multiply in value up and down in only one year, what we are witnessing right now should not come as a surprise. What you can, and must, do is ensure all possible protection to minimize losses and ride the big waves. Money management, trading psychology, and the right mindset are your strongest tools to combat any unpredictability and volatility, regardless of the positive aspects this market bears. Announcements and predictions generated in the crypto community often come with an excess of falsehood and unnecessary drama, so to avoid this, just try to the best of your abilities to keep a cool head and be smart about each move you make. As they say – haste makes waste. Don’t be another failed promise of success but rather invest intelligently – both your time and money.