Cryptocurrencies have become increasingly popular in recent years with Bitcoin leading the frontline. Also, due to the fact that they offer a promising and lucrative investment. What makes cryptocurrencies stand out is the fact that they are digital, hence, there’s no physical money liked with the crypto you own.
People who own cryptocurrency have it stored in a digital wallet and they can buy or sell it through an online exchange. The wallet where the coins are kept may be online or stored offline on a hardware device like your regular USB drive.
It can be said to be a currency and an investment. The latter is what many people consider crypto to be as even just holding some coins or trading can bring you profit. This article was written so you can be abreast with the necessary information about crypto trading.
1. Learn How To Manage Your Risks
As a crypto trader, you need to be very careful when trading. You should never run to acquire or trade any coins because they are currently turning in massive profits; they don’t try it. You should rather stay on your course gathering small but guaranteed profits from regular trades.
When you want to invest, avoid investing your portfolio in a less liquid market. That kind of high trade would require more tolerance; the stop loss and profit target points will be separate from the buying level too.
2. Crypto Trading Volume
It is very important that you look at the trading volume of a token before you buy it and start trading. This is especially true for altcoins with low circulating supply not for some of the top 20 tokens on popular exchanges. You need to find out what amount of the token you’re interested in is being bought and sold in the market.
If it has a high trading volume, that means you would be able to buy and sell the digital asset with ease whereas low trading volume is an indication that it would be difficult for you to purchase or sell them. Low volume indicates there is a lack of liquidity and trading wouldn’t be as seamless as you want. You can find most of this information on exchanges and trade with trading apps; some of which have been highlighted by Review Brokers. Now, when you discover that a token has very low volume, that’s a hint that the project is as good as dead.
3. Market Capitalization in Crypto Trading
At the moment, there are over 4,00 cryptocurrencies that have been listed across different exchanges and more are being added. The news, however, covers only the largest cryptocurrencies by market capitalization and it is these coins that most investors are familiar with.
What is market capitalization or market cap? It describes the size of a company’s token and the metric its value is calculated by multiplying the asset’s price by the total number of shares available. Why do you need to know about it? Because it gives you an insight into the kind of risk is represented by an investment before you start trading it which is why you should check the market capitalization of a digital asset before you buy.
Coins that have a high market cap and a good amount of circulating supply can be said to be less prone to volatility and manipulation by any news or large stakeholders. This is unlike tokens with a smaller market cap whose prices can surge or plunge depending on the news; they have low circulating supply, as such, are vulnerable to manipulation.
4. Know When To Stop Losses And Take Profits
This is a technical way to say have a plan when trading so you don’t trade with emotions. A good trader creates a trading plan for the price they want to buy and sell an asset; they do not deviate from this plan under no circumstances.
This process involves you thinking about what you’re going to do if your trade doesn’t go as planned. That’s where a stop-loss order comes in, it protects the investors from losing their funds by selling the tokens at a low price just below the price at which it was bought.
5. Diversify
Like any investment, you may not always be able to predict what happens. As much as you can make lots of profits from a token, it’s not advisable to stick to one. Diversify and spread your risk by getting different tokens or even assets.
6. Don’t Sleep On Initial Coin Offerings
They are a great way to make some money and invest in a promising project from the onset. They usually have enticing promises so you need to be careful. Perform a background check on the people/team in charge of the project and evaluate the possibility of them fulfilling their promise. Read their white paper and ask questions where necessary.
Crypto Trading can be a risky venture if you don’t know anything about digital currencies and can be quite lucrative if you play the game well. Do well to read more about it before diving in.
