On the background of market volatility, many cryptocurrencies have lost all the funds invested in digital money. Therefore, even if you have capital that can be invested in some cryptocurrency, you need to follow a few basic rules.
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Photo: Flickr
1. Diversification is not always good
It is generally accepted that the cryptocurrency portfolio should be diversified, and it is true that it is dangerous to invest all the money in one coin, and besides, it limits the potential profit. But one should not thoughtlessly throw money at different assets either - everything should be done correctly.
Why do you need diversification of the portfolio? Only to earn more money. You should not invest in a coin just because you do not want to continue to increase investments in the current asset. If you see the potential in the coin and want to be at the forefront, then its another question.
2. Profit - only after the sale
It's great to see your assets grow in value, but that doesn't mean anything. Cryptocurrencies are very volatile, they may fall back tomorrow, so you don't have any profit before you fix it.
If things are going well, you should not get complacent, and until you have invested in a more stable asset, such as a fiat currency, you have not made a profit.
3. Do not sell until the time comes
Many people trade cryptocurrencies based on emotion rather than reason and market data, and as a result, they make less profit or lose more than they could.
If you have made a profitable deal, resist the desire to sell and buy, do not sell your coins just in pursuit of immediate profit. Sell under the right circumstances, which are determined by a variety of factors, from your targets to news that can affect the value of your coin. Stick to the facts and everything will be fine.
4. Choose the most effective way to buy and store coins - every one has its way of buying and storing coins
The market is still young and there are no common practices, so you can make the wrong choice based on someone else's experience. In any case, you will have to decide for yourself how convenient it is for you to buy and store coins.
When you buy it all depends on what kind of cryptocurrency you need. Usually, exchanges do not support all types of coins, so you will have to choose the right one. Not all exchanges are honest, and in some cases, you may not be able to return the coins for a while, because the owner has decided to make a little extra money.
Whichever currency you buy, you will need a wallet - it is not only a security issue, the wallet will allow you to personally store new types of coins, which are not yet on most exchanges. If you do not plan frequent transactions, you will be suitable for hardware purse. Firstly, it is safer than keeping money on the stock exchange, which can be hacked, and secondly, it will keep you from impulsive actions.
5. Think about the profit
Every cryptotrader once faces a dilemma: what is better, to be right or to make a profit? The difference is not always great, but it is: it is important not only to determine which coin will grow in value but also to get an income.
We need to think not only about which cryptocurrency will grow, but also about which one will grow strongest - again, the difference is small, but it may be the difference between a small income and a large success.
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6. Focus on fiat currencies
Evaluating cryptocurrencies only concerning each other is the way to disaster. Take Bitcoin and Stellar as examples. If Bitcoin is rising in price and Stellar is not, you can, of course, buy more Stellar, but that does not mean that Stellar has lost value - just between two cryptocurrencies, the exchange rate has changed.
When determining the value of a coin, compare it with fiat currencies, such as the dollar, so you have a clear idea of how prices change.
7. Buy without delay
Many people do not dare to buy coins only because of market manipulation. Everyone knows that in a situation where there are no rules, large companies can do a trick with artificial overstatement and price reduction indefinitely, until they get the desired profit, and the average person against this background is constantly waiting for the coin to become even cheaper.
8. Manage your emotions
The main problem of a trader is not the "Wild West" of the unregulated cryptocurrency market and not intrigues of swindlers, but his own emotions. Cryptocurrency trading is a constant roller coaster. Every time you look at the value of your portfolio, something changes, and these changes make you nervous. If the currency becomes cheaper, you think it's time to go out if it grows, the question arises as to how long as you hold your position.
And this is natural, but if you want to succeed and make a profit, you have to learn to ignore emotions and focus on numbers. Do not let your fear of being knocked down.
9. If not sure - do not play
One of the best tips for a private cryptocurrency investor is to use only the money you can afford to lose. No matter how promising the technology is and how professional the project team is, there is always a chance that it will not work, and you will lose all your investment, and when it does, it should not be a disaster.
And the next step: a confident action. If you are not sure about the coin, do not buy it. Fear of losing the opportunity makes many people take risks, but in fact, there is no reason to rush - sooner or later, new coins will appear, and the existing ones will fall in price more than once.
This also applies to the sale. If you think you can earn a little more, here you go. If there is no reason to think that until you turn away, the currency will fall sharply in value, keep it.
10. Don't pay attention to the potential number of coins in circulation, look at the actual number of coins in circulation
The supply and demand law also works with cryptocurrencies, which is why market manipulation is possible. The more people buy a coin, the more expensive it is, so it is not possible to say about any cheap coin that it is worth buying.
You have to assess its value relative to the actual number of coins in circulation, and the closer the number of coins in circulation to the maximum value, the more likely it is that the currency will continue to grow in value because with increasing demand the supply will not increase.