Whenever Bitcoin (BTC) fails to break through key resistance levels, traders gain confidence and establish their altcoin positions. Unless BTC …
Trading experience in the cryptocurrency market does not seem to be the most important factor, as nothing can protect players against short-term, unexpected price changes. . Currently, Bitcoin’s volatility is 64% year-over-year, while that of the S&P 500 is 17% and WTI crude is 54%.
However, new investors can avoid the psychological impact of unexpected 25% price swings during the day by following these 5 basic rules. These strategies do not require advanced tools or hold large amounts of money during periods of high volatility.
Limit withdrawals for less than 2 years
Let’s say you have $5,000 to invest, but need at least $2,000 of it within 12 months to travel or do some other work.
With cryptocurrencies, you should not allocate 100% of your capital into it because you may have to sell your position at the worst time, even the bottom of the cycle. Even if there is a plan to use the proceeds from decentralized finance pools, there is always the risk of temporary losses or hacking affecting access to funds.
In summary, any funds allocated to virtual currency should have an investment period of 2 years or more.
Always use dollar cost averaging
Even professional investors get caught up in the fear of missing out (FOMO) and want to build a position as quickly as possible. However, it is also understandable because if everyone is getting 50% profit, consistently going high and even the coin meme is making excellent returns, how are you going to stay calm? watch out?
A dollar-cost averaging (DCA) strategy is to buy the same amount of dollars weekly or monthly, regardless of market movements. For example, you buy $200 every Monday afternoon for a year to eliminate anxiety and constant demand pressure when deciding whether or not to add a position.
Avoid buying all positions in less than 3 or 4 weeks at all costs. Remember, cryptocurrency adoption is still in its infancy.
Do not use too many technical indicators
There are tons of technical indicators, like moving averages, Fib retracement, Bollinger Bands, directional movement indicator, Ichimoku Cloud, parabolic SAR, relative strength index, etc. setup, there are countless possibilities when following these indicators.
The best, experienced investors know that predicting the market correctly is more important than choosing the best indicator. Some prefer to track correlations with the traditional markets, while others focus solely on cryptocurrency price charts. There is no right or wrong here, except trying to track 5 different indicators simultaneously.
Markets are volatile, and that’s especially true in the crypto space considering the speed at which things change.
Know when to stop trading
There will be times when you misjudge the market while looking for altcoin bottoms or seasons. Investors sometimes make mistakes but there is no need to immediately increase the bet size to cover the loss. That’s a very bad thing to do.
Whenever you get a bad move, stop trading for a few days. The psychological impact of losing will be burdensome and negatively affect your ability to think clearly. Even when a clear opportunity presents itself, ignore it. Instead, relax and try not to think about trading.
The truly successful investors are the ones who have been around the longest in the crypto space, not the most gifted.
Continue to invest in rising coins
This may be the hardest lesson of all because investors tend to take profits in bullish positions. As discussed, the volatility of the virtual currency market is extremely high, so a gain of 30% will not be enough to recover previous (or future) losses.
Instead of selling rising coins, you should buy more. Of course, market data or overall sentiment shouldn’t be ignored, but if you’re still bullish, consider adding to a position until the overall market signals weakness.
In the end, you can achieve huge gains of 300% or 500% thanks to the courage and determination to hold the most profitable position. These are definitely the returns you would expect from entering a risky market like cryptocurrencies, so don’t panic when they pop up.
Any rule can be broken
If there is a route to success in cryptocurrency trading, many will find it after years of operation but the profits quickly fade. That’s why you should break your own rules from time to time.
Don’t blindly follow investment advice from experts or experienced money managers. Everyone has their own risk needs and the ability to replenish positions after a failure. But more importantly, do not let yourself become too pressured during the journey to participate in the virtual currency market.
The above are the basic experiences in using virtual money, in each article in this category we will provide you with the experience in the virtual currency market more clearly.