How to Start Profitable Trading Without Mistakes
Trading cryptocurrency is attractive because of the possibility of earning both on a growing and on falling coin price. Every successful cryptotrader today had to learn how to trade, making mistakes, lose money. Today, the experience of traders has been sufficiently studied, trading methods are systematized, which allows beginners even at the very beginning of this difficult but very exciting way to avoid mistakes and achieve success without significant losses. Let's find out together what the cryptocurrency trading is, and what the first steps the newcomer should make.
How to start cryptocurrency trading?
First of all, the beginner needs to understand what the tradable assets are, to understand their basic characteristics. The general properties of the absolute majority of coins are volatility, that is, a tendency to significant changes in market value. If the fiat money, that the absolute majority of people use for cash and non-cash payments for goods and services, are valued for their exchange rate stability, the price of cryptocurrencies is usually variable.
Which cryptocurrency to choose for the first transactions on crypto market? Here the rule is simple - choose a coin with an average volatility. With weak price hikes (low volatility), there is practically no possibility to earn. Trying to make money on a coin with high volatility is too risky for a beginner cryptotrader, since it is quite problematic for a newcomer to predict its rate. We make the first conclusion: a minimum of risk and the greatest probability to earn gives the trading of coins with an average volatility.
Another important characteristic for the trader is the reaction of the coin to the news of the market, its dependence on the exchange rate of other currencies. These features are one of the main elements of the trader's strategy. If, for example, a cryptocurrency has the property to follow the rate of another coin, then the trader has a reliable tool for forecasting the trend. If, however, there is no news about the coin or it practically doesn't react to them by price changes, then these are the most disadvantageous conditions for a newbie trader, in which the probability of error is high, and in general it is difficult to trade.
Take into account all the features of the behavior of all coins - for a beginner this is an impossible task, and unnecessary at all.
Before you start trading:
- select a few coins you will trade;
- have patience to learn their basic properties that will determine your trading strategy.
- Don't look for strange cryptocurrencies - they behave extremely unpredictably.
Select popular coins which behavior can be studied from various sources of information:
- News of exchanges and developers.
- Crypto forums, on which experienced traders discuss news, trends. This information will allow you to keep abreast of all the latest developments and help you draw the right conclusions.
- The knowledge obtained from these sources will become the basis for understanding crypto market, will allow you to choose the optimal strategy for each asset, regardless of its current trend.
Parameters for choosing a strategy for profitable crypto trading
When you have decided on a cryptocurrency, it's time to choose a strategy. Although, you can change the sequence of actions and, choosing a strategy, choose the appropriate coin for it. But this isn't the best choice, since there are hundreds of cryptocurrencies, there are only few strategies. Therefore, follow the path of least resistance - it's better to spend time studying the corresponding to the cryptocurrency trend strategies than on studying tens or even hundreds of cryptocurrencies, and usually there are just few of them practically used.
What should be taken into account when choosing a strategy:
- State of the market. If the market is growing, then the appropriate strategy is needed. For a falling market, it isn't good. If the market is uncertain, then a third option of the strategy is needed. You have the possibility to earn, based on frequent reversals of the price of the cryptocurrency. There are strategies for a long trend of growth or a fall of the coin rate, useless with frequent changes in the trend.
- The volatility of the coin. With weak fluctuations, it is better to use a long-term strategy that is more profitable than, for example, scalping, in which the trader quickly closes the position for a small profit. If the volatility of the cryptocurrency is high enough in a certain period of time, then profitable deals are made at high fluctuations of price.
- The important question is when you are ready to trade. We all have routine other than trading. If you have the opportunity to devote to trading, for example, two or three hours a day, then you need a strategy corresponding to a short earnings strategy. If you have an opportunity to devote to work on the exchange very little time, for example, a few minutes per hour, then most likely you won't be satisfied with classic scalping, but positional or swing trading can give a good result.
- Another important point is the size of the basic asset, which you are ready to spend to start cryptotrading. If the amount is small, then risky strategies aren't for you, because then every deal will involve half, or even more, of the asset, and every mistake will cost too much. The proper option is the average capital, which allows to make risky rates. If you have a large amount of money, you can easily use one percent for processing absolutely any, even the most risky strategies.
- What kind of goal do you set for yourself? If you decided at first to just try the different strategies, in order to get a good profit in the future, then try everything, including the most risky strategies. If the newcomer needs a quick earning, then you should opt for the least risky strategy with the minimum probability of loss.
- The choice of strategy also depends on the trader's psychotype. If he is able to instantly navigate in the current situation, knows how to draw simple conclusions, then for him the best option is to trade for short periods of time. If a newbie is prone to assess the overall situation on the basis of all the details available for analysis, then the trading strategy should provide him with enough time to make a decision.
With all of the above, one should keep in mind the basic features of the cryptocurrency, which don't affect the strategy choice at all, but are effectively used for short, long periods, falling and growing market prices. Understanding such subtle nuances comes with experience and can't be formulated in the form of a universal recommendation.
What else should a newcomer in crypto trading do?
After choosing a cryptocurrency and the useful strategy, a beginner trader needs to make several more important decisions:
- Choose a cryptocurrency exchange
There are a lot of trading platforms now and each of them has its own peculiarities. For example, registration conditions that can be simplified as much as possible, or rather complicated. It isn't hard to guess that in this case one can count on a higher reliability of the exchange. Here the decisive factor will be how important an anonymity of registration is for a trader.
You want to remain incognito - look for an exchange, which declares anonymity as one of its main advantages. But here comes the question - how reliable is this exchange? If anonymity is not important, it is better to choose a large reliable exchange and go through the entire registration procedure, including identification.
Ask what people write on the forums, who created this exchange and when, whether it has a token or what its reputation is.
For cryptocurrency transactions, all exchanges establish a commission. If it is suspiciously small, then this is a reason to doubt the reliability of the trading platform. Here, a trader who intends to conclude daily a large number of transactions, it is necessary to correlate the benefits of a small commission with probable losses.
If the trader's strategy doesn't involve a large number of transactions, it is better to give preference based on the reliability, not the commission of the exchange.
- Choose terminal
A trader has only two options. He can use the crypto exchange functions or use a special programs.
In the first case, pay attention to the convenience and speed of the functions. As for the programs, the free software isn't always reliable and inclined to failures, which when trading is completely unacceptable. Do you need a paid terminal for, for example, $100, if a trader trades no more than 50 - that everyone decides on his own.
At first, standart functions of the exchange will be enough for the beginner.
- Choose tools for exchange market analysis
We are talking about tools that allow you to track the index of volatility of the cryptocurrency or, for example, to react on its forthcoming reversal point. Practice shows that for each strategy, more than enough just few thoroughly studied tools. If it is more, the trader will receive additional unnecessary information at decision-making.
- Getting familiar with the fundamentals of the crypto trading theory
Reading dozens of textbooks devoted to general rules of trading on stock exchanges is useless. It's enough to flip through a couple of books. read articles that people write on the forums, listen/read the courses of authoritative cryptotraders.
Remember - all written/heard concerns only the experience of the author of the publication and is often not connected with the real practice of crypto trading.
It will be more beneficial to communicate directly with people who have experience in trading your chosen cryptocurrency. Try to find such person among advisers or in communities of traders.
Typical mistakes of newbies in crypto trading
Detailed theoretical preparation doesn't mean that you won't make mistakes when you will use the strategies on practice:
- The trader moved away from the previously chosen strategy. This happens often, if the newcomer suddenly thought that in the current situation in the cryptocurrency market, he will get more profit if he refuses the chosen strategy. This in most cases leads to losses. The conclusion is simple - follow the chosen strategy and not paying attention to the momentary fluctuations of the market.
- Don't try to earn in an unstability of the cryptocurrency market. This isn't a strategy, but a lottery, in which the jackpot is almost impossible to get. Wait until the situation on the market becomes clear and predictable.
- After an unsuccessful deal, there is a natural desire to roll back the situation, "recoup." To do this, the trader makes careless and not at all related to the chosen strategy actions, which, usually, only increase the losses. It should be understood that cryptotrading implies the ability to learn to calmly treat failures.
- If a trader chooses a single strategy backed by a pair of tools, he will necessarily miss the opportunity to earn money using the most pressing market situations.
Mistakes can be enumerated endlessly, but they all boil down to the fact that a beginner refers to trading isn't serious, based not so much on theoretical training as on the ability to earn intuitively.