What is the Trading all about?
The trading process involves quick buying and intelligent selling of the stock or currency pairs you have got, with the ultimate goal of generating returns that can potentially outperform regular buy&hold investing strategy.
While investors may be content with a 10–15% annual return, traders might seek a 10% return per each month. Trading profits are generated by buying at a lower price and selling at a higher price within a relatively short period. Where buy&hold investors wai out less profitable positions, traders must make profits (or take losses) within a specified timeframe, and often use protective stop-loss orders, to automatically close losing positions on a particular price level.
Trading is immensely time-consuming and frantic for everyone involved in the process. To be sure of what you are doing, you will need to learn on your mistakes, and use trial and error method. That will tremendously help you become more secure in your actions.
Not only that but healthy advice can be fruitful to your learning process as well! Let’s review some of the most crucial points for a trader, right here and right now.
Turn off the Emotions
An unbreakable rule in trading says that you should never involve your emotions in the business. Latter is a basic rule for anyone who trades over any term, but especially for the ones who trade for the short one.
Emotions, in this case — fear of loss, effects and completely disrupts traders plan of action. Getting over the emotions are also crucial after an unsuccessful trade or after selling a coin which is skyrocketing just after selling it.
To sum up, traders should not regret profit they’ve missed as well as trades they have lost. Human beings are not rational creatures, but sometimes, this can be our biggest strength.
Time is our trader’s money
In terms of events and occurrences, a week in the crypto market is equivalent to three months in the traditional capital stock exchange. One who wants to jump right into the deep water of crypto trading has to follow it not just on a daily basis, but on an hourly basis. It’s not everyone that can play this game.
Nevertheless, traders need to consider the amount of time invested in the process. Sometimes it pays off to be a long-term investor, rather than a day trader. By the way, as a day trader, it does not necessarily mean stock players are bound to buy and sell and trade every single day. Trades can reach their destination within minutes, as well as within months.
Traders must think about the time they are willing to invest in studying and tracking the market. Remember, the time has a marginal cost, or in other words — time has a price tag. If one has decided to put the time and effort into trading on a daily basis, it is better to start with small doses and examine the performance before increasing invested amounts.
An additional benefit of crypto — the possibility of trading on micro-transactions. Unlike the capital market, where if put an eye on Apple stock, traders would need to buy a minimum share equivalent to a couple of thousand dollars, while in crypto, it can perform transactions for a few cents.
Risk management
Trading cryptocurrencies can be divided into three basic risk categories. By investing in established coins like Bitcoin and Ethereum, traders are exposed to low risks, whereas the rate of future growth can appear very limited.
When trading coins and tokens with lower market capitalization, traders 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.
Know where the money goes
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.
While considering a long-term investment apart from technical analysis of asset price it is worth to take a look at fundamental factors. A trader has to research the project including technology and value proposition and market demand. Reviewing partners and a team of the project is worthwhile as well. The roadmap will help to predict the milestones of the expected price increase.
If traders don’t have the competence to judge the technology for themselves, they better look for trustworthy professionals in the circle of friends or from trusted sources on the internet. But be aware; we are talking about a lot of money here, and you can not trust every and each random expert you come across.
Spending Money in One Go is a mistake
Another very common mistake beginners make is spending all their trading money in one go. If traders find a good entry, they should buy in with a percentage of their funds (50% — 60%) and hold the rest to see whether the entry works.
This way, even if a coin drops following trader’s purchase, they can average it down by buying more at the dip. Similarly, if the uptrend continues, they can always buy more, and even though this approach reduces the profit margins, it secures the trader’s position and prevents them from being all-in on a trade that may go south.
