Crypto trading experience doesn’t seem to be the most important factor as nothing can protect players from the “storm” of unexpected price changes. Bitcoin’s volatility (the standard measure of daily fluctuations) is currently 64% year over year. Meanwhile, the same index is 17% for the S&P 500 and 54% for WTI crude.
Bitcoin price action in 2021 | Source: Tradingview
However, traders can avoid the psychological effects of unexpected price fluctuations of 25% throughout the day by following these 5 basic rules. Fortunately, these strategies don’t require advanced tools or hold large sums of money in times of high volatility.
Plan to limit withdrawals to less than 2 years
Let’s say you have $ 5,000 to invest but need at least $ 2,000 to travel or do other work within 12 months.
With cryptocurrencies, it should be noted that investing 100% of your capital is not advisable as it may be necessary to sell the position at the worst possible time, even at the end of the cycle. Even if the proceeds from DeFi pools are planned to be used, there is always a risk of temporary losses or hacking attacks that compromise access to funds.
In summary, all funds allocated to the crypto should have an investment period of 2 years.
Always use the DCA strategy
Even professional traders get scared of missing out (FOMO) and the urgency to build positions as soon as possible. It’s understandable, however, because if everyone is making 50% profit, rising consistently high, and even the coin meme is making excellent returns, then how are you supposed to stay calm?
A dollar cost averaging (DCA) strategy is to buy the same amount of dollars weekly or monthly regardless of market movements. For example, buy $ 200 every Monday afternoon for a year to remove anxiety and constant demand pressure when deciding to add a position.
At all costs, avoid buying any item in less than 3 or 4 weeks. Remember that the adoption of cryptocurrencies is still in its infancy.
Do not use too many indicators in the analysis
There are tons of technical indicators like Moving Averages, Fib Retracement, Bollinger Bands, Directional Movement Indicator, Ichimoku Cloud, Parabolic SAR, Relative Strength Index, etc. Setup, there are tons of ways to follow these indicators.
The best, skilled traders know that predicting the market correctly is more important than choosing the best indicator. Some prefer to track correlations with the traditional market while others focus solely on cryptocurrency price charts. There is no right or wrong here other than trying to track 5 different indicators at the same time.
Markets are dynamic, and that is especially true in the crypto space, given the speed at which things are changing.
Understand when to stop trading
There will be times when you will misjudge the market while looking for altcoin lows or seasons. Traders sometimes make mistakes, but there is no need to raise the stake immediately to cover the loss. It is a very bad thing.
If you experience a “bad move”, stop trading for a few days. The psychological effects of losing are distressing and affect your ability to think clearly. Even if the opportunity presents itself, ignore it. Instead, relax and try not to think about trading.
The truly successful traders are not the most gifted, but the ones who have been in the industry the longest.
Keep investing in profit coins
This can be the hardest lesson of all as investors tend to take profits when they win positions. As mentioned earlier, the volatility of the crypto market is extremely high, so a profit of 30% will not be enough to offset previous (or future) losses.
Instead of selling active coins, traders should buy more. Of course, market data or general sentiment should not be ignored, but if you are still bullish, consider adding a position until the broader market signals weakness.
In the end, by courageously and determinedly HODLing the most profitable position, you can make “huge” profits of 300% or 500%. These are definitely the returns you would expect from entering a risky market like crypto, so don’t panic if they show up.
Any rule can be broken
If there is a path to success in cryptocurrency trading, many will find it after years of operation, but profits are dwindling quickly. This is why you should break your own rules every now and then.
Don’t blindly follow investment recommendations from KOLs or experienced asset managers. Everyone has their own risk requirements and the ability to replenish positions after a default. But more importantly, don’t get too stressed out on the go!
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