Cryptocurrencies such as Bitcoin have piqued many people’s interest since the declaration of COVID-19 as a global pandemic by the World Health Organisation (WHO). Bitcoin’s explosion in value back in 2017 created an international buzz among consumers, traders, and investors alike. Still, it is in 2020 that Bitcoin proved to be a safe haven asset against global crises.
Early in January 2020, the world’s largest cryptocurrency stood firm amid a world war three scares as tensions rose between the United States and Iran. Additionally, Bitcoin managed to rise from its ruins and recover its lost value in March 2020 after shedding over 50 percent of its value amid a global economic crisis instigated by the coronavirus pandemic. These two events proved that Bitcoin had matured well to become a safe-haven asset despite just existing for just a little over a decade.
As a result, cryptocurrency trading is quickly becoming one of the most popular ways to generate additional income. Cryptocurrencies are constantly dominating the headlines, especially Bitcoin and its notoriously high price fluctuations. Various people have different reasons as to why they trade cryptocurrencies apart from making profits. Some of these reasons include:
- Some people believe cryptocurrencies are the future and want to be part of an exciting project
- Some people distrust the traditional financial system and central banks
- Some people believe that transactions should remain anonymous
- Some people believe in Blockchain technology
No matter what your reason for trading cryptocurrencies maybe, making profits is a top priority. If you plan to jump into crypto trading for the first time, it is significant for you to be aware of the new venture you are getting into. Below are some valuable tips to help you navigate the cryptocurrency landscape successfully.
Useful tips on how to start trading
Learn technical analysis
Bitcoin’s nature makes it stand out compared to other asset classes or financial instruments. There is no central authority or economic body that can influence its valuation in the market. However, news events can have unforeseeable effects on its price movements, while other financial instruments evince irregular correlations. To a large extent, Bitcoin’s price movements are speculative and do not rely heavily on traditional economic theories.
Technical analysis is a discipline applied to weigh investments and spot trading opportunities through analyzing price patterns gathered through trading activities. Technical analysis can be used on any cryptocurrency with historic price data. Researchers in the trading industry have developed several patterns and signals to back technical analysis. It is a very vital skill to learn before you start trading.
Be ready to accept volatility
It is pretty evident that cryptocurrencies are not as stable as fiat currencies. A few months ago, in December, Bitcoin was trading below the $20,000 price level. Fast forward to March 2021, and the world’s largest cryptocurrency is a little shy of the $60,000 price level. As a new trader, you will need to be enthusiastic with your decision-making and think about the best for the amount of capital you have.
Even the world’s best traders are not entirely precise with the trends of these cryptocurrencies, and it would not be a shame to find yourself in a similar position. Since market volatility is out of your control, you should spend the mental energy on the factors you can control. For instance, a diversified investment portfolio may help accommodate your risk tolerance and polish the market’s crests and troughs.
Implement the stop loss and take profit features
As mentioned above, you should enter the cryptocurrency market prepared for price volatility. To avoid making impulse decisions when volatility is high in the market, it’s essential to define your trading positions’ limits. One way to be prepared for market volatility is to determine a price where you intend to cut losses or take profits before opening a position.
Having a stop loss and taking profit implemented will help you remain sensible at times of pressure during a trading session. Massive price swings are an opportunity to reap hugely from the market, but they could also turn out catastrophic if the price movement is against your predicted outcome. Before implementing a stop loss, you should understand the average volatility of the coin you are trading and the extent of the loss you are prepared to incur during a trade.
Constantly be updated with the latest news and events
There will always be a lot of contrary views against Bitcoin and the cryptocurrency market in general. Many people believe that Bitcoin is just a bubble, and those who engage in them will ultimately end up in disappointment.
If you believe that Bitcoin can help you achieve your goals, you should avoid fake news sources and be vigilant of the crypto sphere’s most reputable news sources. Additionally, regular news events may not have a speculative effect on the price of cryptocurrencies. However, sudden news items can have a profound impact on the cost of Bitcoin. Some of the notable headlines to watch out for include:
Learn how to use both hot and cold wallets
Even though cryptocurrencies exist in digital form, there is still a way of storing them online and offline. Hot wallets refer to any crypto wallet that connects to the internet. Overall, hot wallets are easier to create, access, and accommodate more crypto coins. On the other hand, cold wallets refer to any crypto wallet that stores cryptocurrency private keys offline. Overall, these wallets are much safer, but they do not accommodate many cryptocurrencies.
Although hot wallets are free, they are more susceptible to hacking, regulatory hurdles, and even technical failures. In comparison, cold wallets are much safer, but they are more expensive to acquire. As you gain more experience and learn to diversify your cryptocurrency investments, you should learn how to utilize the two wallets effectively.
After learning all these tips on how you can start trading, it’s time for you to put them into actual practice. To begin trading cryptocurrencies, you will need to select a trading platform that will suit your needs. A good cryptocurrency platform should excel in security, ease of use, pricing, withdrawals, and customer support.