Over the past few years, a large number of people have been earning a lot of money by trading cryptocurrencies. However, there are hazards lurking around every corner, trying to destroy the dream of making money quickly. Before entering the space, new crypto traders should check out these 10 tips first.
1. Study the Fundamentals
In order to prepare for trading properly, you should know and understand the key components of the market. You can begin by investigating how blockchain works, learn what decentralization means, and research where the world might need cryptocurrencies.
Be sure to understand smart contracts, blockchain-based tokens (like ERC20 and ERC223), and the different wallet systems. Furthermore, you should assess the current market situation. If you’re looking to trade bitcoin or ETH futures, you’ll need to learn futures trading basics as well as understanding the markets for these specific coins.
In comparison to stocks, coins and tokens generally have very low market capitalizations. Therefore they have much more growth potential, but at the same time, they are also rather risky.
2. Know the Basic Rules
If you are trading for the first time in general, don’t just rush into it. Taking the proper amount of time for preparation could save or even gain you a lot of money. You can find tons of tips about trading and investing on crypto forums, blogs, and social media profiles. Invest some time reading articles from different sources, decide between trading vs investing, make up a strategy for your trades, and think about your personal willingness to take risks.
Understanding the futures trading basics and essential terms of a market are also unquestionably important, such as market capitalizations, trading volume, and the differences between value and price. Learning from experienced traders and investors is also strongly recommended for new Crypto Traders.
3. Think About Risk Management
Trading cryptocurrencies can be divided into three basic risk categories. By investing in established coins like Bitcoin and Ethereum, you are exposed to lower risk, whereas the rate of future growth is likely slower as well. When trading coins and tokens with lower market capitalizations, you can earn much higher percentages, yet the risk rate is generally higher too.
It is important to stay attentive here; some cryptocurrencies only release a short amount of their supply which could lead to decreasing prices when a flooding of the retained tokens or coins occurs.
4. Learn the Basics of Technical Analysis
The prices of cryptocurrencies are mainly fueled by the evolvement of technology and the media. Nonetheless, using technical analysis can help you find the right moment to buy or sell.
Alongside learning your futures trading basics, knowing something about candlesticks, supports, resistances and indicators, like the relative strength index (RSI) and moving averages (MA), can be quite useful to master the market.
Still, you should not perform trades that rely solely on the use of technical analysis unless you have superior expertise in this field.
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5. Analyze Projects on Their Fundamentals
One of the key indicators for determining whether the price of an asset will rise is the actual benefits of the project standing behind it. Analyzing the technology, team, and use cases appeared to be a good trading or investment strategy in the past.
When considering whether to invest in cryptocurrencies, a fundamental analysis is especially important in determining the true value of a project. Never trust the hype around a project. Instead you should stay rational and review the aspects stated above.
If you don’t have the competence to judge the technology yourself, look for trustworthy professionals in your circle of friends or from trusted sources on the internet. But be cautious; we are talking about a lot of money here, and you can not trust every expert you come across.
6. Check the News Often
As you already know, important news often has a high impact on the prices of coins and tokens. As a result, you should always stay up to date with reports, announcements, and rumors. To properly do this, be sure to look at popular online blockchain magazines and communities at least once a day.
You can check out CoinTelegraph, Coindesk, and the social news aggregation website Reddit. Of course, there are many other valuable news sources you will find in your research. Also, check out CoinMarketcal for upcoming events in the field.
7. Use Twitter
The social media giant Twitter has become one of the key platforms regarding announcements and public discussions in the crypto world. Almost every company has an active Twitter account nowadays.
Follow important blockchain personalities, projects, traders, and influencers to make sure you never miss a thing. Additionally, you can search for #hashtags whenever you want to read the opinion of the community.
8. Participate in Communities
Deeper participation in communities might be a little time consuming, but it is definitely worth it. By actively observing or engaging in Telegram chats, subreddits, or Bitcointalk threads, you have a great chance of obtaining precious information.
It is quite common to release new information to the core community before announcing it to the public. Moreover, you can get a picture of the general market sentiment, which is certainly beneficial for trading decisions. Occasionally, you will get the chance to participate in exclusive airdrops.
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9. Review Different Exchanges
There are hundreds, maybe even thousands of cryptocurrency exchanges. If your goal is to trade a fairly high amount of altcoins, it is inevitable to adopt more than just one exchange. To find the right exchange(s), you should inspect possible candidates for trading volume, reliability, fees, number of assets, and user experience.
Other important features could be a fiat gateway and margin trading, or, if you’re a scalper, zero commission fees, like Digitex Futures, will be imperative. From April 27 when the mainnet launches, this will be the first time that traders can experience liquid markets for crypto derivatives without incurring a single fee.
10. Improve Your Security Standards
The most common reason for people losing money, aside from price fluctuations, is related to crime. Since the blockchain economy is extremely profitable, complex, and relatively uncontrolled, hackers and fraudsters work hard to steal your capital.
In order to fight off their attacks, you have to be extremely cautious. For exchange accounts, you should use highly secure passwords and two-factor authentication. Never share your passwords or private keys. Never send money to anyone who is claiming that they will send you more money back. For the best security, you should always store your assets on a hardware wallet like Ledger or Trezor.
To get into cryptocurrency trading is without a doubt a journey full of obstacles. If you take your time, prepare yourself, learn the cryptocurrency and futures trading basics, and apply the things you have learned, there is no reason you cannot succeed.