Trading cryptocurrencies can be a challenge depending on your strategy. There are those that seek to gain long-term profits and those that seek to gain short-term profits. It is important to employ the right methods in order to avoid falling into losses. There are some common mistakes that day traders make.
In this post, I have highlighted tips and tricks that will help you avoid making such mistakes and ensuring that you are always on a profit-making trend. Different traders have different methods. What is included in this post might not be your strategy but you can share with us what you know so that we can also sharpen our skills. Otherwise, enjoy reading through the post and let me know what you think about it at the end in the comments section.
#1 Trade The Most Popular Cryptocurrencies
Trading cryptocurrencies has been on the increase in the recent past. There are different cryptocurrencies that you can trade in. Make sure that the cryptocurrencies you choose to invest in are those that have a lower spread and ones that will ensure your chances of making a profit are granted. More widely traded cryptocurrencies move quickly and can be predicted just like fashion.
Some of the major traded cryptocurrencies include Bitcoin, Eherium, Litecoin, and Ripple. In most cases, you can find very many trading opportunities in just one currency. This means that you do not need all of them for you to be successful. Just concentrate on one or two of them.
#2 Trade With A Favorable Risk To Reward Ratio
One of the main challenges that traders face is the transaction costs. At times you might think that you are making a profit but end up to paying amounts of costs in transactions. As a day trader, it is almost certain that you are paying higher costs than long-time traders.
This is because you make lots of smaller trades meaning that you are investing in and out more frequently. It is also important to take note of the commission that the broker or your exchange charges for each thread.
If you are not careful you might get out of trade thinking that you made a profit. When you combine all the smaller losses together at the end of the day you realize that you have made a huge loss.
It is also important for a trader not to risk a huge amount of money especially when it's almost certain that the amount of profit you make is not significant. Instead, you can select trades that you are sure can make at least 10 to 30 pips. In order to make sure that you are not making losses as a result of transaction costs your winning should be larger than the losses you make on the trades.
#3 Don't Overtrade
Some traders are tempted to tread just because they are bored or in some cases, they are not patient enough. It is important to make sure that you are trading at the right time and when your mind is clear. Set a timeline and a timetable of when and how to trade.
Always remain patient because there are many trading opportunities with cryptocurrencies. The market changes from time to time so trade when the market is right and when there are lots of opportunities. Always have a sharp eye and look out for such opportunities.
#4 Focus On Long-Term Trading Trend
It is possible to make profits by buying and selling cryptocurrencies over a long period of time. For instance, you can trade in a 30-minute time frame. Do not be discouraged just because the treads are moving up and down every day. In the long run, opportunities will be favorable as time passes.
Most traders are hungry to make quick profits. These are the traders that other investors focus on. Any simple mistake means that you are accruing your losses. At the end of the day, you find that you have not made a profit from your trades.
#5 Always Watch News And Announcements
As a day trader you might not be interested in important news or major announcements but sometimes it can be costly if you do not know what is going on or when major announcements are to be made. The nature of cryptocurrencies is characterized by volatile price swings and if you are not aware of this you might end up making a misinformed decision.
If the market price at a particular moment is close to your stop loss price just when a major announcement is around the corner there are two things that you can do; the first option is to go ahead and trade out or you can move your stop loss further away from that moment in time. It is important to be alert so that you are not locked out of the market momentarily just as the price spikes.
You also need to be very fast so that you can exit a market at any given time without hesitation in the case where the trade is not going in your direction.
#6 Stick To The Rules And Your Strategy
There are many people that are tempted to make decisions just because they have read about a strategy somewhere or their trading partners are using a particular strategy. At the end of the day, they end up choosing the wrong strategy which turns out to be costly.
Some of the decisions traders make are driven by pure greed. Make sure you choose your trades carefully and your stakes carefully as well. Do not invest huge sums of money especially when the market price is going up and down very fast. You are also expected to be very careful because there are other traders online that might take advantage of your wrong decisions.
Cryptocurrency trading can be regarded as a business worth investing in. The most important thing is that you know when to invest and how to do it. Take time to learn about different strategies before implementing. It takes time to make profits via cryptocurrencies trading but the most important thing is to take the long-term approach. Always be on the lookout for popular cryptocurrencies market because they provide bigger opportunities for making a profit.
It is also advisable to carry out consultations with people who have a rich experience in trades. They can share their knowledge and skills which can be beneficial to your trading strategy. Some people trade together while others to read as individuals. Depending on what fits, you can make use profits trading online. If this post was educative kindly let us interact in the comment section below.
AshemaKevin is a Freelance writer. He covers all topics revolving around business. You can follow him on Twitter @ashemakevin
Author // Kevin Ashema