See 8 of the most foolproof tools and tips that have helped the most successful bitcoin traders in the world.
Right now, if you don’t trade or own bitcoin (or any other cryptocurrency), it looks like you are an outsider. However, before you delve into the sometimes complex world of trading in 2021, you will need to be armed with tools that successful traders before you have used.
1. Know what you want
This might sound like something everyone should know, but it isn’t always the case. Some traders go into the bitcoin industry with one thing in mind but attempt to do so many things in a very short time. This is a recipe for disaster, and you should avoid it.
Therefore, you should determine if you will buy and sell cryptocurrencies or trade stocks using digital currency. Both of these activities are very different and require different skills.
For example, people who trade forex or stocks with bitcoin first familiarize themselves with hedging techniques; meanwhile, you will need to master the holding technique if you want to buy and sell. Again, it boils down to understanding what you want to do.
Also known as asset allocation, diversification is a method of spreading your investments across different digital assets. This is one of the most vital tips for the beginner investor because it helps reduce risk and improve the possibility of gain. A simple example of how this works is as follows:
Let’s say A and B have $1,000 each to invest in the crypto market. If A spreads their money across 10 currencies ($100 each) and B invests their entire money in one currency, B is more at risk of making a loss than A. Also, A is more likely to make a profit even if one or more currencies see a price drop than B if their only currency experiences loss.
Related article: Everything you need to know about bitcoin automated trading systems.
3. Copy Trading
This is another tip for traders who are new in the industry. Given its name, copy trading means that you mirror the trades that other experts in the field make. This way, you are betting on their years of experience, and it is mostly profitable. Of course, no trader always makes the 100% correct decision, yet, the possibility is higher when you select the top traders and copy their moves. It is even better when you realize that you don’t have to do this manually; there are platforms that enable you to link your account to expert traders and do as they do. This brings us to the next tip.
4. Set up an exchange platform
One of the first things you do to invest in a crypto is to have a platform. Whether you are looking for a quick buy or a quick sell, you will need a trading account. Fortunately, we have detailed how you can set up one in this article: How To Open A Bitcoin Trading Account And Start Trading Today.
5. Choose the right payment method
A follow-up tip for no 4. above is selecting the appropriate payment method. Options abound regarding this, including bank transfers, debit and credit cards, PayPal, and others. However, your choice should be guided by the following: ease, fees, identification requirements, duration to process transactions, customer support, and more. Since this is how you either pay in or receive money, you need to scrutinize your decision properly.
6. Buy and hold
Stylized as HODL, it is a term that many who buy and sell bitcoin are aware of. Many analysts and experts advise beginner traders to hold their digital assets for as long as possible. This is important because a small price drop may send inexperienced investors into a selling frenzy. Meanwhile, if you are entering the industry to own bitcoin, buying and keeping it safe is the best thing to do. Don’t even look at the price movements at all! Now, keeping your crypto is another whole ball game.
7. DeFi staking
DeFi – decentralized finance – is a way of keeping your crypto assets in platforms that pay interest over a period of time. Unlike the traditional bank, where you can set up an account and keep your money, DeFi institutions are not owned by one person. Instead, it is run by a community of traders that operate computer programs known as ‘smart contracts’ – programs that run when predetermined conditions are met.
8. Safe storage
Of course, there are bad actors in every financial space, and the crypto industry is no different. Thus, before choosing a digital wallet to store your bitcoin, you need to know that you can trust it. One way to do this is by checking its reputation in the industry as word travels fast, and if you ask the appropriate traders, you are less likely to lose your funds. Yet, other people are not the biggest threat to losses among traders. For some, they hurt themselves in the attempt to be as evasive as possible. What are we trying to say?
When choosing a keyphrase (password), ensure that you do not forget it because, unlike your Facebook account, losing your keyphrase may mean the complete loss of that storage account.
Like all other business endeavors, bitcoin trading is also not a piece of cake. The usual suspects like greed and haste also come to play and can mean a bad loss if you don’t keep them in check. In addition, there is the misguided belief that it is a get-rich-quick scheme, and when people don’t make money immediately, they are discouraged and work away.
Experts say that regular trading requires dedication, even with the aid of automated trading robots. Also, don’t invest money that you cannot afford to lose.
These tips will get you started in your crypto trading journey, but you will need to keep improving your arsenal and pick up as many ideas as possible on your way to success.
You may also like to to read our latest article, Follow this step by step guide for how to make a cryptocurrency.