Tips to trade cryptocurrency like a pro

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We’ve all heard about the tales of overnight crypto millionaires. Folks who opted to risk it all on Bitcoins and found themselves being turned into millionaires or billionaires within just a few hours.

It’s also likely that you’ve heard the horror stories about investors who literally lost everything on the crypto market because of a bad decision.

The truth is however much more nuanced. Investing in cryptos is not an ideal way to get rich quick, but neither is it a scam. Like any other investment, research and understanding are crucial if you are to make it in such a killer industry.

Here, we take a look at some of the things you absolutely must know when you decide to step into the crypto market.

But first, don’t forget that safety always comes first.

The unregulated nature of the cryptocurrencies has made the crypto market a favoured hunting ground for con artists and thieves. Thanks to the pseudo-anonymity offered by cryptocurrencies like Bitcoin, tracing the origin and destination of funds can be a real nightmare.

Hence, when you first start trading cryptocurrencies, always work with a trustworthy exchange and keep your wallet secure. If you regularly trade in cryptos, you should seriously consider investing in both hot and cold wallets.

Hot wallets can be used to store your working funds i.e. for trades and to receive funds where the cold wallet should be used to store the bulk of your cash holdings. With so much money at stake, hackers have plenty of incentive to break into and steal your hard-earned cryptocurrencies.

With that out of the way, let’s take a look at how you can trade crypto like a pro:

1. Prepare yourself for huge swings

The extreme amount of market volatility is one of the reasons why crypto millionaires were minted literally overnight. With cryptocurrencies like Bitcoin, investors could see their investment returns growing by more than 300% within just a few hours.

This is a double-edged sword as the rug could also be suddenly pulled from under your feet. What was once a highly valued commodity during lunchtime, could be essentially worthless before the day is out.

Thus, when trading in cryptos, it’s always best to be prepared for the worst at all times. Avoid getting emotional with your trades and always have a plan and a stick to it.

All too often, amateur traders get too caught up in the moment and allow panic to colour their decisions. Before committing to a decision, do your homework and be prepared to act decisively when needed.

2. Do your homework

As any trader worth his/her salt will tell you, you’ve got to do your homework. Many junior investors have made the mistake of underestimating the power of research.

Studying price charts and looking into factors that contributed to sudden spikes or crashes in asset prices will allow you to better understand what drives the prices of cryptocurrencies.

Take the current market uncertainty as an example. In the aftermath of a divisive election and an ongoing pandemic, investors have turned to cryptocurrency as a sound alternative asset. 

While distrustful of Bitcoin initially, the cryptocurrency’s credibility as an investment was solidified thanks to a successful halving. Because of this, institutional investors are beginning to take an interest in alternative finance - hence further making the case for Bitcoin and driving up prices.

Investors who understood this pattern would have already begun snapping up Bitcoin prior to the halving. Something which further showcases the importance of thorough research.

Click here to read more about the current cryptocurrency trends.

3. Diversify your assets

As the old saying goes, you should never put all of your eggs in one basket. Failing to diversify your cryptocurrency holdings is a surefire way to court disaster. To minimize your risk exposure, your investment portfolio should consist of crypto assets of varying risk classes.

But aren’t all cryptos extremely volatile?

Not exactly. Stablecoins are a hybrid form of crypto that peg their value to that of an existing fiat currency. This allows investors to tap into the crypto market whilst still keeping their risk exposure under control.

A mix of stablecoin and mainstream cryptocurrencies such as Bitcoin, Ethereum, and Ripple topped off with other more niche cryptos will help you diversify your investment portfolio.

The crypto market can be a scary and unpredictable place. However, with the right strategies, and knowledge, you will have no trouble finding success.