The popularity of crypto has skyrocketed in the last few years as corporates, banks, investors, and even regular people can no longer avoid it. This non-traditional investment is renowned for its precarious eye-watering volatility and highly profitability. That is why you should be so cautious about where you put your money.
On one hand the volatility of this market makes it highly risky, but on the other, when there’s a high risk, there's a pretty good chance of scoring even a higher reward. Of course, there is no “one size fits all” advice when it comes to investing in crypto, nonetheless, considering the fact that all the major crypto indexes are just below the all-time highs, it's almost a plausible scenario that maybe a little wise risk can pay off.
The year 2021 may have been one of the greatest for the cryptocurrency market, making it unavoidable anymore. Given that you’re probably don’t plan on going on an extended holiday to another planet where crypto is not making headlines, here are 5 tips for maximizing the profits of cryptocurrency trading:
- Risk Management Plan
Remember that you should trade, not gamble with your hard-earned money! Being the epitome of the uncertainty of the outcome is something that both trading and gambling have in common; as both place a wager and wait for the results of it. However, the only difference is that the trader has a risk management plan that will guide them through the process successfully. That being said, deploying a stop-loss strategy is essential to traders as well as only risking an amount of money that they can actually afford to lose. If you decide to buy a coin and you're a risk-averse kind of trader, keep in mind that the best investment strategy is HODLing for long periods of time. So if you are willing to stock up some bitcoins while they're on sale, and you don't have weak hands, buying some BTC may be a good fit for you. Otherwise, maybe you should wait for clearer signs of the markets.
- Buy the Dip, Sell the Rally
A good trader should know when to HODL, when to buy and most importantly when to sell so you won’t be just a bag holder! Having no intrinsic value to them, like gold and other precious metals, it’s wise to buy crypto when the market is in a downtrend, and cash out those gains when the coin hits an all time high. There is a saying popular among crypto traders which is “in bull markets you make opportunities, while in bear markets you make money”. We believe that investment opportunities exist in both bull and bear markets.
- Avoid FOMO and FUD
Realistically speaking, it’s important to admit that no story of crypto success would be complete without alluding to the Fear of Missing Out or FOMO, giving in to it can turn bulk of profit into grave losses. But as we say in crypto, when in doubt, zoom out! When pessimism prevails in bear markets, it’s advised that you avoid panic-selling under the influence of the naysayers and focus on the long term goals that you’ve set for yourself. For example, many crypto analysts predicted bitcoin to hit six figures by last December, and we now know for sure that their expectations didn't match reality at all.
- Buy the Rumor, and Sell the News
This tip might sound very risky, but it can also be a smart move under the right circumstances. Nevertheless, every trader must benefit from such ebbs and flows of the market, waking up to cheaper bitcoin is always wonderful depending of course on your tolerance for risk and turbulence you are opting to. You’d be surprised that the biggest downfall for rookies is doing quite the opposite.
Some investors tend to hunt out undervalued coins that are subjected to "rumor" of potential data that suggests that it might increase in value in the near future, causing its price to go higher in anticipation due to the high demand. In case this "rumor" was true, this might even push the price higher, which translates into more gains. If it wasn't true, these investors will reap a profit of the undervalued coin they bought. So buying a coin when a good news about it turns out to be true might be the worst time ever to enter a trade, as this is exactly the time that the more experienced traders or whales who bought the lower “rumor” price are selling to cash out gains.
- Do Due Diligence on Any Coin You Eye Investing In
In decentralized asset investment like crypto, it’s you, and only you, who is responsible for your money, so make sure you do your own thorough research before adding any coin to your balance sheets. Instead of buying those new low-cap coins under the influence of family or YouTube videos, read what the White Paper promises, including the overall market cap of the coin, the project behind the coin, its use cases, the reputation of the developers and team, the underlying technology, and the timeline or roadmap.
