In this final chapter, let‘s cover some of the important tips and advice to follow when managing your money and your exposure to risk when trading.
Safe Trading Checklist
Be Realistic: Trading in cryptocurrency isn‘t something that will make you rich overnight. Set some realistic returns on your trades for set periods of time to monitor yourself. Use stop-loss and take-profit points to manage your trades and remove emotion from your transactions.
Manage Your Emotions: Create a plan and stick to it. Research and use credible sources to base your decisions on. Don‘t fall victim to fear and follow the herd when they are moving in the wrong direction. When you feel a little too excited or worried, slow down, think, use your data to make decisions that are best for your success.
Diversify:It is cliché butdon‘t put all your eggs in one basket. It should be obvious that you shouldn‘t put all the money you have into cryptocurrencies. However, there is no need for you to put all the money you are able to part within one type of crypto coin. A majority should be in a stronger coin like Bitcoin, Ether, and any in the top 5 of the market. A small percentage can be in new coins that have been performing well while the smallest amount should be in ICOs or coins with alittle history.
Ease into Trading: If you are new to trading, start small and start slowly. There is a lot to learn and experience with cryptocurrency which can overwhelm even traders with experience. Test out a few coins and a few exchanges with small transactions. Watch some videos of miners before potentially spending thousands on your own mining machine. Want to start with an ICO? Only invest a small financial amount so you can get the hang of the process before committing more funds and increasing your risk. When you are ready, you will have a better understanding of what type of trader you are, what your strengths are, what your weaknesses are and how best to execute successful trades.
Check Your Sources: When doing research or just interacting with other crypto traders, make sure to be wary of scammers. Don‘t fall victim to a ‗pump in dump‘ or fake ICO scheme. Do your homework, use trusted sources and make sure you are monitoring the market.
Don’t Trade with More Than You Can Lose: The cryptocurrency market is a volatile one. There are times when it seems what is hot one day is tanking the next. To protect yourself, don‘t trade with more than you can realistically part with. You can start with a very small amount and build over time as you become a stronger trader.
You will Lose at Some Point:It will happen, there will be an off day, and you will make a bad trade. Maybe even have a series of bad trades. You are no different from anyone else and immune from this happening to you. So, don‘t put all your coins in one trade and when you do make a mistake, learn from it and move on.
Research, Plan, Chart, Monitor:Don‘t rely on guesswork, gut feelings or the advice of others to trade. No matter how much trading experience you have, don‘t try to predict the market on your own. Follow long-term market trends, learn to read and understand the charting tools we have covered in this eBook, follow the news, watch videos, and learn new tips. Use both fundamental and technical analysis to get a good sense when it is a good time to sell or buy.
It’s About the Big and Small: Speaking of charts, it may be very tempting to monitor your coins in short timeframes on your graphs. As a beginner orintermediate trader, it‘s better that you focus on research and monitoring long terms trends than get caught up in short-term movements. These fluctuate rapidly and can cause you to make emotional decisions that go against your plan.
You Are the Boss:There are platforms out there that allow you to copy the exact trades of successful traders. While tempting, doing this teaches you nothing and puts the control (and your cryptocurrency) in someone else‘s hands. If things go wrong, you won‘t have developed the experience or emotional control to deal with the mess and potentially fix the situation.
Don’t Brag: This may sound like an odd risk management suggestion, but there is truth in it. Bragging about your success in the cryptocurrency community will alienate you. If that doesn‘t bother you then keep in mind, it also makes you a potential target for scammers and hackers. By learning everything that you do and how your trading set up is, they may be able to find weaknesses and exploit them. Be careful what you share and to whom.
Dive Deeper into the Code: The best part of cryptocurrency is the innovation behind the technology. You should try to dig deeper and understand everything that cryptocurrencies can offer besides being a form of currency. Some of the most recent coin successes have been because of the innovations these cryptocurrencies have brought to the market. Look for coins that provide solutions to needs not already met in the market and avoid clones of Bitcoin that have minimal changes.