I was introduced to cryptocurrency a year or two ago, and was immediately hooked by the concept. Like most, I started out tentatively buying a bitcoin or two, and then moved on to try my hand at other coins. Initially I made a little profit and thought, “hey, this is easy, why isn’t everyone here rich?”. It was only after making my first crucial blunders (thereby reducing my total investment to less then my original amount) that I discovered the answer to that question. I’ve since learned from my mistakes and returned to the green zone, but not without a lot of needless stressing and self-administered kicks to my own stupidity. I’m by no means an expert, but it would have been great if someone had given me some of the following practical advice to begin with, so I share it with you in the hopes that you can avoid making the same mistakes!
1) Start small – don’t overinvest
One of the first rules of any kind of trading is not to invest more than you can afford to lose. Even though the outlook for Bitcoin is overwhelmingly positive, the fact remains that the cryptocurrency market is extremely volatile, with large gains and losses happening in a matter of minutes. So, instead of putting the majority of your savings onto a trading platform, start with a small percentage – perhaps maximum of 10%. This should allow you enough money to play around with, but not so much that you will spend years playing catchup if you make a wrong move or the whole enterprise goes belly-up. Especially as a beginner, it’s important to realise that you are going to make losses until you learn the hard way what not to do, so make sure those losses are manageable.
2) Don’t put all your eggs in one basket
If you use all your funds to back a single coin, you’re putting yourself at risk of having a bad time. cryptocurrencies are unstable and subject to wild “pump and dumps” at often unpredictable times. This can leave you in the unfortunate position of either selling at a loss if you end up buying into a peak, or waiting a very long time until you break even (if that every happens at all) to recover your money in full. While some coins fall, others may rise, so by spreading your resources to a few coins that you think are good, you can improve your chances of success through smart trading. A possible exception to this rule is Bitcoin itself, which has developed enough of reputation and stability to maintain an upward trajectory overall (with some notable exceptions during certain periods) and by all accounts may be set to increase its value dramatically over the coming years – I say this with caution, however, as there are absolutely no guarantees (don’t say I didn’t warn you!).
3) All coins are not created equal, so don’t treat them the same way
Following on from the previous statement, it’s important to understand Bitcoin’s role in the overall cryptocurrency market. We’re talking about the grandaddy of them all, the one that started the whole ball rolling, and also the coin that is most widely available for direct exchange to fiat currency (e.g. US Dollars). This means that Bitcoin is the coin against which all others are measured, while also holding the most recognition and esteem worldwide. As such, my personal preference is to treat Bitcoin as a long-term investment rather than trying to buy low and selling high as I do with other coins. Another reason for doing so is that the movement on Bitcoin is generally quite slow (again, with some notable exceptions) while the potential to make a faster profit on other coins is higher. As such, I hold the majority of my Bitcoins in a separate wallet to those I’m actively trading for other coins to further separate them. While I’m sure there are plenty of more experienced traders who might disagree with this position, coming from the perspective of someone who is still relatively new to the cryptocurrency game, it makes sense to me to separate Bitcoin from other coins, at least on a psychological level, at least until you have a better understanding of how the whole system works.
4) Don’t make any sudden moves
Trading with emotion is by far the worst thing you can do. It’s also the mistake I’ve made most often. FOMO can be a real money killer, especially when you see a coin rising fast and quickly buy in only to fall victim to a dump while your back’s turned a few minutes later. The same applies to selling a coin prematurely because you’ve given up on it, only to find that it regains some value further down the line. Patience is key in this regard – unless you have good reason (by way of research) to believe that a coin is done for, it’s often best to wait out the hard times and hope for a return to your break-even point (or even, dare we say, some profit) at some point in the future. Many’s the time I’ve done just this (despite feeling foolish for my previously bad decisions in buying a certain coin at the wrong time) and seen profit weeks or even months later as a result of holding. On the same note, waiting for the inevitable correction after the peak of a price rise might allow you to buy in at a much better price and see more sustainable profits when the price rises again. Many changes in price can happen very gradually, but be quite significant over time depending on where you bought in. Of course, nothing is certain in the crypto world, but patience has definitely paid off for me more often than not. The bottom line: DON’T PANIC.
5) Don’t believe the hype
While I have found the crypto community to be generally strong and mutually helpful overall, there are always going to be people who are in it to make a quick buck off deception. The easiest way to do this, of course, is to hype a coin on forums or exchange chatrooms (such as Poloniex’s aptly named Trollbox), with the intention of causing a price rise so they can sell at a higher profit. On a less malicious note, the vast majority of people using such forums are likely as clueless as you are, so it’s a matter of opinion more often than not. As a novice trader, I paid far too much attention to these sorts of people and bought according to their ‘advice’, with disastrous results. A far more useful strategy is to follow your own judgement, objective information, and do some good research to decide on the best time to buy or sell. Oh, and luck. Lots of luck.
6) Don’t go in cold
The world of cryptocurrency is diverse and growing rapidly, with new coins being created frequently. While the computery specifics of which coin’s code is better (it was a while before I began to understand what a blockchain even was) may realistically be beyond the grasp of most of us mere mortals, it’s nonetheless important to research a coin before buying into it. Many coins are attached to various projects (Steem being the most obvious example) that may give you some insight into its potential for growth, or whether (as many are) it’s merely intended to grab the attention of novice investors for a quick pump upon introduction, allowing the developers to make most of the profits before the coin dies. Most legitimate coins have websites, twitter accounts, and a variety of other ways you can research and learn more about them, and plenty do their best to explain the technical stuff in a way that most people can understand. In the same vein, it’s a good idea to learn as much as you can about the way market trading works in general. This will better help you to understand and read trading charts and predict trends of your own accord, which, with experience, is often far more valuable then relying on any outside advice.
7) Don’t freak out
In such a volatile market, it’s easy to make mistakes, even if you’ve followed all the above advice and then some. It’s also easy to lose money without making any mistakes at all due to the unpredictability that is often a hallmark of cryptocurrency. Unless you’ve overinvested (which, really guys, that was rule #1!) any losses you incur shouldn’t be life-altering – rather view each one as a lesson in what not to do next time. It’s largely inevitable, unless you’re either very good at this or very lucky, that you will start off making more losses than gains, so be mental prepared and don’t kick yourself too much. Try not to obsess over the whole game either – six hours spent staring at charts and tickers might be more productively spent elsewhere at the end of the day. Strive to be successful by taking small steps and increasing your knowledge with each trade. Keep calm and carry on!
I’m sure there’s a lot more intricate and well-informed advice to be given on successful cryptocurrency trading (and if anyone would like to share it, please do – I’d like to hear it too!), but the above lessons have been the ones that hit home most strongly with me on a practical level as a novice trader. I hope you too can benefit from them. Good luck, and may the wisdom of Satoshi be with you!
original article -https://steemit.com/bitcoin/@generalspecific/new-to-crypto-trading-a-few-tips-on-what-not-to-do-from-someone-who-did-all-of-them