Cryptocurrency has become a hot topic in the last few years. The sudden rise of Bitcoin and the introduction of new altcoins has prompted many people to become interested in this market. However, many fortunes are made and lost, particularly by cryptocurrency traders who are new and don’t know what to expect. Cryptocurrency is a volatile financial instrument and it is essential for every trader to move forward the right way for minimizing losses and maximizing returns. Listed below are some of the best tips for trading cryptocurrency that can be helpful for all traders:
Make the trends your friend
One of the key principles that traders need to grasp is following trends as they change. The biggest mistake that traders make is that they are unable to change their approach even when the markets begin to change. Since they don’t adjust to changing market trends, they end up losing all their capital. Therefore, you don’t just need to adjust to the trends, but also be able to identify when it is changing.
Have a proper trading plan
Not creating a trading plan is a mistake, particularly when trading cryptocurrency because this markets move very rapidly. If you don’t have a proper trading plan, how will you know if you have succeeded due to a defined and repeatable process? Some of the rules that you need to set for yourself include what you can trade, how many trades to make in a day and what signals to trade.
Perhaps, one of the best tools at the trader’s disposal is backtesting, which allows them to test the trading method they plan to use. Backtest refers to the process in which a rules-based system is tested on a market with the help of historical data. If a method used in the past didn’t perform, why should you assume that it would do well in the future? While this might not be a foolproof method to test strategies and methods because the markets are constantly changing, but it still gives you a good idea.
Use simulated trading for testing
Before jumping into trading with a new strategy, it is recommended that you first try it out without risking any real cash. This gives you an insight into how the strategy will perform in real time. There are demo accounts available online that come with virtual money and are an excellent way for you to learn how the real market looks like without actually risking your money.
Choose the right broker
Now that you have tested your strategies, it is time for you to choose a broker. There are a variety of brokers to choose from. Every broker will offer you a different selection of cryptocurrencies and you need to choose one that offers the one you are interested in. Look for a trustworthy exchange such as GigaFX that doesn’t just provide you with the offerings you want, but also gives you access to the best security and customer service. GigaFX review will show you that the broker is reliable and provides numerous payment methods to cater to traders around the world.
Don’t forget about Stop Loss
When you are trading cryptocurrency, stop losses can be extremely important. This market is known to move incredibly quickly, especially when there is any news. Bear in mind that traders only have minutes to react and even a slight miscalculation can wipe out your profits and investment in a blink. Therefore, it is recommended that you use a stop loss, which can limit the amount of loss you have to deal with during trading and help you last for long in the market.
Use position sizing
In the initial stages of trading cryptocurrency, it may seem as if it is better to use your entire account value for trading purposes. This is not true at all as cryptocurrency is quite volatile and you can suffer from large losses if the market direction is moving against you. As a result, it is best to begin trade with only 10 percent of your account. Moreover, it is also better for you vary the size of your trades, depending on the size of your stop loss and your conviction for that trade. Doing so can help you in surviving longer and keeping losses low.
Hedge your risks
Hedging is a rather advanced technique that’s not recommended for beginners as it can cause confusion. Put simply, hedging refers to the process in which traders use several strategies, some long and some short, simultaneously. These strategies take advantage of indicators for determining when a cryptocurrency is likely to experience an increase in value. This type of trading works great when you think one crypto will perform better than another, but you don’t know where the market will go for the day.
Take advantage of automated trading
Sometimes, no matter how hard a trader tries, they are unable to stop themselves from making some of the common mistakes while trading cryptocurrencies. Even if they have been trading for years, they end up breaking their rules and lose money in this way. These traders can benefit from automated trading. This involves traders putting their strategies, adjusting the parameters and then have them executed by a bot. With this method, they don’t have to spend hours looking at charts and figuring out what move to make. Also, this removes the emotion from the entire occasion so no rash decisions are made.
No matter what cryptocurrency you choose to trade on GigaFX.com or any other website, these are some of the best tips you need to remember. Traders can jump into the market, but they will not succeed if they are not careful. Apart from using these tips, it is also essential for every trade to continue expanding their knowledge about cryptocurrency. It is a relatively new market and the rules are still being developed so you need to learn continuously and practice in order to avoid mistakes. Doing so will help every trader in trading cryptocurrencies successfully.