The term “Crypto” has been in existence for quite a long and has become a household term now. Various investors who deal in traditional forms of investment are now coming forward to trade and invest in digital currencies. But, for newbie investors and traders of the Crypto industry, taking the first step can be daunting. There are certain statistics (“95% of all traders lose money”) that do not give a very good impression of the Crypto sector, and to clear all clouds around this, we have created a list of Crypto trading tips. These tips can help you sustain yourself in the Crypto market in the long run.
So, without further ado, let’s hop on the bandwagon and check all the tips.
5 Crypto trading tips for investors and traders
#1 Get a brief understanding of the Crypto exchange, their UI-UX, and the fees
The initial step to becoming a successful trader is to have an understanding of how Crypto exchange works. Having a lack of understanding of this can lead to making unplanned, unintended trades. Investors should pay close attention to each platform’s trading fees, as they can add up rapidly.
While 1% per order may not seem like a big issue for a “buy and hold” portfolio, for more active traders, it can significantly impact the P&L at the end of the day. Traders must also take slippage and trade spreads into account. A 1% transaction can become 3–4% once spreads are factored in along with trading fees. To cut overall investing costs, it is crucial to understand how to lower Crypto fees.
#2 Get the hang of interpreting trading charts and indicators
Technical Analysis (TA) is the basis of all advanced trading strategies. This type of analysis depends on identifying market trends by studying information like price movements and trading volume. Some of the popular technical indicators for Crypto trading include:
- Relative Strength Index (RSI)
- Ichimoku Baseline
- Moving Average Convergence Divergence (MACD)
- Bollinger Band
- Exponential Moving Average (EMA)
When trading Cryptos, these indicators are frequently used to identify possible momentum shifts and confirm the trends. They can be used to “time the market” by anticipating a coin’s value change before the market reacts. Investors can then pinpoint multiple entrance and exit points for particular Crypto assets.
Although indicators make an effort to measure the psychological and emotional components of trading, it is important to remember that people are unpredictable and past performance is not a reliable indicator. Therefore, indicators and Crypto charts should be a part of a well-rounded trading strategy rather than being the only factors used to choose when/what to trade.
#3 Keep a regular check on your trading strategies
Never make a trade unless it is part of a comprehensive, carefully planned strategy. This includes identifying buy/sell opportunities, determining appropriate profit margins, and preparing backup plans before executing a position. Investors must employ technical indicators, conduct fundamental analysis, and learn from their failures to refine their strategies.
Dollar-Cost Averaging (DCA) is a famous trading strategy among newbies. This strategy is about consistently purchasing a predetermined amount of Crypto, regardless of the market price. Investors can build up their portfolios in this manner while being ignorant of the volatility of a continuously changing market.
#4 Join hands with major trading pairs
There are ten unsuccessful small-cap tokens or tokens with little to no practical value for every successful token that surges in price. Significant Cryptos like Bitcoin and Ethereum are far more stable and have, up to now, consistently performed well over extended periods. For experienced traders, this short-term volatility can be a beneficial tool, but for newbies, such rapid price changes can be overwhelming.
Liquidity is another benefit of sticking with popular trading pairs. Due to several factors, periods of low liquidity can be detrimental to traders, especially those with sizable portfolios. Slippage is the basic issue, which can entirely destroy profit margins in volatile markets like Cryptos. Moreover, low-liquidity altcoins may not even be offered for sale, leaving investors with a failed asset in their portfolios. Crypto screeners like Coinmarketcap and Coingecko can help you find the highest traded pairs on any Crypto exchange.
#5 Focus on the longer-term trend
The Crypto market is known for its volatile price fluctuations, which can offer ample trading opportunities for the seasoned trader. However, value shifts within a 24-hour period should never be depended upon. Instead, when placing trades, traders will profit from taking into account both short- and long-term trends.
Trading in the same direction as the main trend over a longer timeframe will increase traders’ success rates. Longer-term trends can be used to view assets to help avoid trading on emotion and counter-trend trading, which has a lower chance of making a profit. When analyzing Crypto charts, several chart patterns can be used to spot price reversals and long-term continuations.
In general, long-term downtrends offer investors opportunities for short trading, whereas bull markets favor purchases and leverage to enter long positions.
If you are looking to diversify your investment portfolio, Crypto is definitely worth exploring, but you should be cautious. It is similar to investing in the conventional stock market; safeguarding your money is just as crucial as looking for investment returns. However, with the Crypto trading tips mentioned above, you can start your journey in Crypto trading and become a profitable trader.
Happy trading!Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.