Trading digital currencies are the new talk of the town, and it is quickly ruling the world of virtual investments. But with “cryptocurrency” itself a relatively new concept, here are must-do steps you are to take for a higher chance of trading-success.
4 Tips Before You Start Trading Cryptocurrency
- Profit Targets And Stop Losses
The world is witness to how cryptocurrency is leaping off of books, and up towards true financial gain. Although digital currencies are essentially unaffected by economic movement, the most recent global catastrophe (yes, COVID-19) has shown everyone that non-fiat currency is what can move forward almost without fail.
So, the first thing you should do in your digital currency trading journey is to map out what your profit targets are. You can set your own personal “minimum” in which to price your digi-coins. In other words, set a price on said coins.
At the same time, affix your stop losses as well. Stop losses are a determined minimum profit. The moment you hit this amount, you stop trading. Even if it seems as though the demand is high and traders are willing to bid higher, don’t.
Create this “trading” habit. Remember that there is no “trend” in cryptocurrency. What might seem like a profit boom can easily slump back down in a second. Always hang on to your profit targets and stop losses.
- Understand Volatility And Underlying Assets
The fact is that digital currencies are volatile. This is no secret, and this is, in fact, a variable which pro traders fully understand.
It is a risk crypto-investors take. Then again, what investment doesn’t involve risk? Trading with fiat-currency-backed assets has its own volatilities, too. Only, it is a bit different, when speaking of digi-coins. As mentioned earlier, its market is near-impossible to predict.
Because of this, having close targets is the safest bet to take. Either that or tell yourself not trade at all. At least, not at the moment.
- Low Price Doesn’t Mean Green Light
Go back to step number 1. Let your profit targets and stop losses be your anchor especially when your preferred digital coins suddenly plunge to low prices. Sudden low prices shouldn’t move you to just-as-suddenly invest all you have in them.
Try observing this formula: Current Market Price x Total Number of Outstanding Shares. It isn’t merely about the price of a coin. And it is a rookie mistake you shouldn’t have to go through, now that you are being wise about your investing.
Instead, look at the market cap. The higher it is, the more ideal it will be for you to invest.
- Sell Order Placement
This is a tip many are either unaware of or ignore. Sell order placement. Markdown a realistic sell order amount and keep it unmoving at that. Let this be your revenue target. For the time being, let it stay steady. You might just be surprised that a few buyers may want to meet your set price.
Even better, sell orders are coupled with economical transaction fees as they are deemed as “markers”.