Top 10 Tips for New Crypto Traders

in #cryptocurrency6 years ago (edited)

 

Top 10 Tips for New Crypto Traders

When someone decides to start trading crypto currencies, they enter a  completely new territory. Over the past few years, an incredible amount  of people have been earning an awful lot of money by trading these new  types of currencies. However, there are hazards lurking around every  corner, trying to destroy the dream of making money in a short  timeframe. Before entering the crypto space, I recommend working through  the following useful suggestions. 

1. Study the fundamentals of cryptocurrencies, blockchains, and their market

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. 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. The cryptocurrency  market is also more prone to manipulations; big players have the ability  to drive markets up or down by using trading strategies or releasing  pre-planned news. Pro tip: Look up the “Buy the rumor, sell the news” phenomenon. 

2. Know the basic rules of investment, trading, and markets

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, make up a strategy for your trades, and think  about your personal willingness to take risks. 

Understanding the 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. 

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 low risks, whereas the rate of future growth is very limited 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. When  investing in an initial coin offering, you have very high growth  potential accompanied by a very high-risk potential. The performances of  ICOs are highly influenced by the current market situation, (bear or bull market), which gives you another reason to stay conservative. 

Pro tip: Blockchain protocols appeared to have the highest growth rates in the past. 

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. 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 which rely solely on the use of technical analysis unless  you have superior expertise in this field. 

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 to invest in Initial Coin Offerings, 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 on a regular basis

As you already know, important news 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. 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. 

Pro tip: 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 insider 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. 

9. Review multiple exchanges

At the time of writing, there are around 200 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.  In 2018, you can also expect decentralized exchanges gaining a lot of  popularity. On this type of platform, you keep full control of your  assets and never have to rely on a centralized power. 

10. Improve your security standards. A lot.

The most common reason for people losing money, aside from price  fluctuations, are 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, and apply the  things you have learned, there is no reason you cannot succeed. 

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