Trading cryptocurrencies is not an easy task. Indeed, it may take time for beginners to be able to get profitable in this market while trading digital assets. However, there are some tips and tricks that you can follow to trade better.
In this article, we will share with you which are the top 5 things to avoid while trading cryptocurrencies. This guide will be useful for you to understand which are the main risks related to trading digital assets and why some things must be avoided at all cost.
Disclaimer: All the information provided by AltSignals and its writers shouldn’t be taken as financial advice. The article has been created for educational purposes. Never invest more than what you are able to lose and only ask for advice to your personal financial advisor.
Tip 1 – Don’t Take Too Much Risk
If you are a beginner and you want to get profitable while trading cryptocurrencies, try managing your risk in the best possible way. That means, don’t start by using margin or high leverage, invest a small part of your funds and try getting a balanced portfolio.
Risk-on assets as virtual currencies can be subject to a lot of volatility and this should be managed carefully. Try getting some low interest and safe investments before dealing with digital assets to increase your profits.
Avoid investing in small-cap digital assets or placing your funds in virtual currencies that have recently been launched to the market or are not widely known.
Tip 2 – Avoid Trading Illiquid Cryptocurrencies
The cryptocurrency market has a large number of digital currencies. Indeed, some platforms report that there are more than 2,000 virtual currencies all over the world that can be traded by users.
Due to this reason, many of these digital assets are not liquid, which can create larger price changes and increased volatility. If we purchased a large amount of these assets, it will then be more difficult to get rid of them if we want to exit the market.
Moreover, it will certainly be more complicated to buy large amounts considering you can be eating part of the liquidity of that specific trading pair in a small exchange. This will result in your position paying a premium.
Tip 3 – Avoid Using Not Known Platforms or Exchanges
Another thing that seems to be obvious is to avoid using not known platforms or small exchanges in the crypto space. While there are hundreds of exchanges to trade digital assets all over the world, it is always recommended to trade through the most secure, known and popular platforms.
Exchanges such as Binance, Coinbase or BitMex are usually the best options for experienced and beginner traders. These exchanges have more liquidity, they work better than smaller platforms and have been in the market for several years. Moreover, they also have taken different measures to reduce to the minimum the possibilities of being attacked and hacked.
Tip 4 – Avoid Involving Your Emotions Into Trades
One of the things that many traders do is trade with their emotions. This is one of the things you want to avoid in trading, but mostly in cryptocurrencies. As there are different projects that attract a large number of users and enthusiasts, it is not good to be in love with one or several projects.
Avoid putting your emotions into the charts. When you trade, the most important things to see are in the charts and not in our emotions. Better results will be achieved if you avoid involving your emotions when you trade. If you don’t want to have your emotions play against you, it will be very important to use clear stop and limit orders.
Tip 5 – Avoid Getting Too Excited or Worried Too Early
Finally, the last thing you must avoid is getting excited too early. If you losing or earning money on your trade, don’t get too excited or worried too early. Instead, use stop-loss orders that will help you handle your risk while trading virtual currencies.
If you instead close your position or gett too worried you might end up losing more funds. This is why it is important to trade with clear stop-loss orders and with a strategy that would fit all your needs in the market.
In this article, we have shared with you some tips and tricks for you to better trade in the cryptocurrency market. Remember, never invest more than what you are able to lose and ask information to your personal advisor.