The number of crypto traders is increasing every minute and as it does, all of them try to figure out the best way to trade crypto.
Want to know how to become a better trader?
Just keep reading!
Never invest money you can’t afford to lose
In general, the first and most important rule of day trading or any type of investment, is to never trade with funds you can’t lose.
Most decent investors win only 60% of the time and this is very acceptable. Hence, they lose 40% of the time and you also need to be ready for that.
You should always invest the amount that you are comfortable with.
Diversify but always follow Bitcoin
A very easy and common rule to follow when trading crypto-assets is to diversify your funds. This means to invest your money into more than one crypto-assets.
As a rule of thumb, you should invest at least 50% of your money into valuable and trusted coins. This ensures that you don’t lose most of your money investing in risky assets.
On the other hand, you should always follow the movements of Bitcoin. This is because the Bitcoin price has an 80% correlation with the prices of Altcoins.
Therefore, you should monitor the price changes of the first crypto-asset to understand how your holdings will shift.
Have a strategy
If you want to be a good trader you should always have a good plan. The strategy should fit your trading styles and personality.
There are some strategies that are good for inexperienced or unknowledgeable traders. One of them is trading according to trends. For instance, when the price of the coin starts decreasing the trader sells the following coin. This strategy is very easy to follow, but when doing this you should closely look at the crypto news and predictions.
An opposite strategy to this one is reversed trading when an investor trades against the trends. This strategy is for more experienced traders and can be very risky at times. In order to do this you should be able to properly estimate the pullbacks of the market.
When creating a good strategy you should always consider volatility, volume and liquidity.
The volatility of the asset shows how much you can potentially earn. The more volatile the asset, the more money you can gain.
On the other hand, liquidity gives you the opportunity to trade at a stable price meaning that you can buy/sell the coins without affecting its price.
Last but not least, volume portrays the number of times the crypto-asset has been traded in the set timeline. This shows how much interest there is in the asset.
Track your trades
As a crypto investor, you should always keep track of your portfolio, it’s losses and profits. It can become very tricky when using different wallets, exchange and coins. At the same time, managing your portfolio will become frustrating and time-consuming.
This is why you can use the great tool that is a crypto portfolio tracker. This type of application will help you to manage your holdings and use advanced portfolio management and statistics features.
Backtesting can be amazing when trying to figure out whether you should invest or not.
Backtesting is the method of testing a system founded on rules in the market with the use of historical data.
Of course, you can’t be 100% sure that your predictions will be right, but it’s a great strategy nonetheless.
In conclusion, crypto trading can become very profitable when you have a working strategy and know how to effectively manage your risks. If you also want to make it easier, take a look at the complete crypto tracker guide.