The trader, known on Twitter as Potato McGruff, shares tips especially for those new to the crypto market.
Cryptocurrency trading. It brings incredible delight when prices skyrocket – and incredible discouragement when a portfolio is losing money.
Therefore, I want to share information that helped me successfully trade cryptocurrencies. My task is to shed light on the world of trading and, I hope, save readers from the frustrations and common mistakes of beginners.
1. Determine what type of trader you are
Think carefully and decide which style suits you best. Many people immediately imagine the intraday traders from Hollywood films, turning in millions. But to be honest, day trading comes with a lot of stress. You can quickly lose money if you are not responsible for your actions (especially if the trader does not know what he is doing).
So, there are three types of traders:
- Short-term (day traders; work intraday);
- Medium-term (swing traders; take a position for 2-7 days, sometimes longer if the trend requires it);
- Long-term (investors; buy on drawdowns, hold a position for a long time).
All three types make money in the market, but use different strategies. You do not have to be strictly the same type. Personally, I belong to the category of medium-term traders and investors.
You don’t have to trade every day. Sometimes it’s better to skip a trade, watch the market. Being overly active is one of the most common mistakes beginners make. Wait for the right moment and open a position, being aware of the actions. If a trader cannot say exactly why he entered the market, then he does not trade, but gambles.
2. Remember that market psychology is incredibly powerful
Technical analysis is a powerful tool. It helps you make informed decisions, but it’s not a crystal ball at all.
Fear, uncertainty, doubt, and the fear of missing out are extremely powerful emotions, so even the most reliable pattern may not work. Be sure to manage your risk and use stop losses.
Analyze the incoming information. For example, when reading the official channel of the cryptocurrency on Telegram or chatting with another “cryptogeny”, remember that they are directly interested in the growth of its price. At the dawn of my trading, I lost a significant amount of money, succumbing to the persuasion of a group of people who foreshadowed the rapid growth of a certain cryptocurrency to $ 1.
When a large number of people repeat the same thought, it becomes fixed in your head, and you begin to believe it. There is a fear of missing out on a “unique” opportunity. Common sense helps to cope with this: just calculate what the capitalization of the currency will be if it grows to $ 1. It is not difficult.
3. Learn to calculate the real value of a cryptocurrency
The currency I lost money in is DigitByte (DGB). I was told that by the end of the year it will cost $ 1. Then I did not know how the value of coins is determined and how it is related to capitalization, and blindly invested money at the peak of value. I paid dearly for my carelessness.
The value of a cryptocurrency can be calculated by dividing its capitalization ($ 563 million) by the number of coins in circulation (9,739,480,205 DGB): $ 0.061952.
In other words, for DGB to be worth $ 1, the capitalization must grow to $ 9.77 billion. Ask yourself, is this realistic in the case of your cryptocurrency? Make sure you fully understand the potential of the coin and set realistic expectations.
4. Watch out for Twitter – your best friend and worst enemy
Twitter can be a great source of information. But keep in mind that 99.9% of the users posting charts to Twitter have already taken positions, bought their currencies and are now trying to move the market in their desired direction. The guy who convinces you that a certain coin will fly to the moon must have already invested in it. His friends and associates did the same.
Doubt everything. What indicators did the person use to reach this conclusion? Not familiar with a specific indicator? Study it (a description of some indicators can be found in the Insider’s Encyclopedia). In addition, many technical analysis courses can be found on the Internet.
Do your own research. How well do you know the person or group encouraging you to buy some cryptocurrency? How long have they been trading? Most of the advisors are hidden behind Twitter profiles. You don’t know who they are. A large number of subscribers does not mean that a person has extensive experience and can be trusted.
Don’t be afraid to ask questions! Most Twitter writers will happily point you in the right direction or explain their schedules if you ask politely. However, you should not ask about what, when and how to buy and sell – you must make these decisions yourself, based on your personal financial situation. No trader can answer these questions for you, since there is no absolutely reliable trading strategy.
5. Follow general advice
Slow down. If you miss an opportunity, another will follow. Exhale, relax. If the cryptocurrency you bought becomes cheaper, review your analysis again. How reliable is the development team, is the coin used in real payments? If the project is promising, the value of coins will rise sooner or later. Of course, there are exceptions, but in general, waiting for drawdowns is a common practice in investing. I started making more money by finding promising cryptocurrencies, buying them and waiting for growth. An example is Dogecoin (DOGE). I bought it for 15-17 satoshi, held it for about three months and sold it for 100+ satoshi. Chasing the next market leader is a sure way to lose money. If you bought a good cryptocurrency, wait for it to grow and don’t worry.
Remember, altcoins are not bitcoin. Decide on a goal: is it to buy more bitcoins, or invest in a certain coin? Keep this in mind when building your portfolio. If the goal is to gain a position in Bitcoin, do not get attached to other cryptocurrencies.
Bitcoin is the king of the cryptocurrency market. Always keep it under control. It can destroy any alternative currency very quickly if overlooked.
Use a hardware wallet. Place in it coins bought on the exchange for the long term. How will you feel if the exchange suddenly stops working and all your investments disappear?
Use two-factor authentication! But not via SMS, but using a special device / application, such as Google Authenticator (previously there were cases of hacking SMS authorization). This is the best way to protect your account from hackers. Use unique passwords for different exchanges. Yes, it’s not always convenient, but you don’t want to lose your coins, do you?
Bookmark the exchanges. Don’t search for them every time on Google – phishing sites often take advantage of this by raising their position in search results or by placing fake ads.
6. Never trade alone
When you trade alone, you are deprived of the opportunity to exchange analysis, ideas and knowledge with like-minded people. Some people have a negative view of paid trader associations, while others praise them. If you intend to enter such a community, I recommend choosing an educational group rather than a group dedicated to disseminating trading signals. You need to learn how to properly analyze the markets and protect your own interests. What will you do if the signal group ceases to exist? You have to fork out anyway. You can pay for training in a group, lose money in the market, gaining experience, or combine both methods. Personally, at the dawn of my trading career, I joined the paid educational community, and have never regretted it. I would not have achieved such results if I had taken a different path.
Even if you decide not to join a paid education group, register at one of the many free trader forums. Just remember that each person has their own goals and priorities. Beware of scammers and manipulators. In this sense, paid associations are preferable: they are more often inhabited by serious traders / investors.
Patience plays a key role in cryptocurrency trading as the market is highly volatile. Don’t be afraid to miss a deal – the current environment is extremely rich in opportunities. Remember: it is easy to make money in this market, but it is much more difficult to keep the money received. Don’t get attached to deals. Don’t let greed gain the upper hand and gradually cut your position as prices rise. There will always be cryptocurrencies ready to take off. There will always be new opportunities and deals.