For some time now, I have been closely watching the performance of cryptocurrencies to get a feel for where the market is headed. The routine my elementary school teacher taught me—where you wake up, pray, brush your teeth, and eat breakfast—has changed to waking up a bit, praying, and then going online (starting with coinmarketcap) to find out what cryptocurrencies are. Red.
The beginning of 2018 has not been kind to altcoins and related assets. Their performance has been crippled by bankers’ frequent speculation that the cryptocurrency bubble is about to burst. Despite this, ardent cryptocurrency followers are still HODLing and, truth be told, reaping big.
Bitcoin recently dropped to almost $5,000; Bitcoin Cash approached $500, while Ethereum found peace at $300. Almost every coin was a hit except for the newcomers who were still in the excitement phase. As of this writing, Bitcoin is back on track and trading at $8,900. Many other cryptocurrencies have doubled since the start of the uptrend, with market capitalization ranging from $250 billion to $400 billion.
If you are slowly getting used to cryptocurrencies and want to become a successful trader, the following tips will help you.
Practical tips on trading cryptocurrencies
• Start with humility
You’ve already heard that cryptocurrency prices are skyrocketing. You’ve probably already heard that this bullish trend won’t last long. Some opponents, mostly respected bankers and economists, continue to call them get-rich-quick schemes with no solid foundation.
Such news will not make you rush to invest and apply moderation. A little analysis of market trends and currencies worth investing in can guarantee you good returns. Whatever you do, don’t invest all of your hard-earned money in these assets.
• Understand how exchanges work
I recently saw a friend of mine post a Facebook feed about one of his friends who was trading in an exchange, he had no idea how it worked. This is a dangerous move. Always review the site you want to use before you sign up or at least start trading. If they provide a dummy account to play with, then take this opportunity to see what the scoreboard looks like.
• Don’t insist on trading everything
There are over 1,400 cryptocurrencies available for trading, but it’s impossible to deal with all of them. Spreading your portfolio across more cryptocurrencies than you can effectively manage will minimize your profits. Just pick a few of them, read more about them and how to get their trading signals.
• Stay alert
Cryptocurrencies are volatile. This is both their bane and blessing. As a trader, you must understand that wild price swings are inevitable. Uncertainty about when to make a move makes one an ineffective trader. Use hard data and other research methods to make sure when to trade.
Successful traders belong to various online forums where cryptocurrency discussions are held regarding market trends and signals. Of course, your knowledge may be sufficient, but you should rely on other traders for more relevant information.
• Diversify meaningfully
Almost everyone will tell you to expand your portfolio, but no one will remind you to deal with currencies used in the real world. There are a few bad coins you can deal with to make a quick buck, but the best cryptocurrencies to deal with are the ones that solve the existing problems. Coins used in the real world tend to be less volatile.
Don’t diversify too early or too late. Make sure you know the market cap, price changes and daily trading volume of any crypto-asset before making the move to buy it. Keeping a healthy portfolio is the way to get great returns from these digital assets.