Cryptocurrency is a means to remove bank involvement in monetary transactions by storing information in encrypted publicly available block chains instead of bank records. It is like a digital asset working as a medium of exchange with the use of cryptography to attain security in transactions as well as control in the creation of additional units of the currency.
Cryptocurrency trading requires two essential things: a cryptocurrency wallet, and a cryptocurrency exchange that facilitates the trade. The wallet serves like a place that stores encrypted passwords. These passwords represent coins. When an exchange takes place, it can be likened to a typical stock exchange, but is never a part of it, or simply a currency exchange for a person that travels from one nation to another. Like in stock exchange, joining a cryptocurrency exchange would need you a bank account (a cryptocurrency wallet) and an access to the actual exchange.
Winning in cryptocurrency trading is quite tricky. To help you succeed, these tips below might help you:
- Invest only what you can afford losing.
Joining in cryptocurrency trading is like a financial investment where there is room to either win or lose. You win when you gain returns; you lose when you lose. The thing, here, though, is the amount that you can gain or lose is relatively high especially if you have a highly speculative investment like Bitcoin. For instance, when you trade bitcoin, there is enough chance to lose money if you have not decided with any amount of thorough assessment.
Losing huge money is heartbreaking even if you claim to be a real investor. Due to this, it would help if you play wisely and smartly by investing only a portion of your money that you can afford to lose completely. Apparently, what makes these investors successful is how they diversify their portfolio. To them, this is a great way to lessen risk exposure, easing gains in other assets and allowing oneself to cover losses in another investment. Aside from that, investing enough also enables them to make good decisions, analyzing financial movements without any pressure at the back of their minds.
- For each trade, be goal driven.
Having clear goals can help you keep your focus and grace even during times of extreme volatility. Setting goals is very important especially if you are engaged in Bitcoin trading. As you place a trade, identify what price will bring you earnings and cut your losses in advance.
Do not let your emotions influence your decisions. And with set goals, it will be easier to avoid this. For instance, traders that have not specified their target price may make a profitable trade at first but this will likely spike greed which never helps. If you are run by greed and other type of emotions, buying low and selling high will be hard for you.
- Avoid setting stop losses too low.
A stop loss is one that can highly trigger you to liquidate your position if your losses reach a certain point or value. Although this essentially helps you to put an end to your losing game, it is not always a good tool to grab and utilize. Setting a very low stop loss is discouraged. Why? Its effect is market manipulation by individuals or groups that own large amounts of currencies as they can cause the price to go up or down by large amounts just to trigger stop losses. Take what happened on GDAX as an example. On June 24th, 2017, there was an account that placed a multimillion dollar sell order at the market price. This consequently triggered hundreds of stop losses, thus many people had lost their investments.
- If your investment is unprofitable or under leverage, close it within a day.
Leverage is when you borrow or lend an asset that you hope will appreciate or depreciate, respectively, in the future, eventually siding to your advantage. For instance, in Bitcoin, you have to wait for a price fall to realize a profit. This will allow investors to reclaim ownership at a lower price. However, there are other fees that should be covered as well like the trading and interest fee. And in Bitcoin, daily interest charge applies up-front for every 24 hour period, thus the importance of closing your account within it or you will be obliged to spend for another day’s interest fee.