Crypto trading has gained a lot of momentum in the last decade. The world might not know who Satoshi Nakamoto is, but we do know is that this individual may have kick-started the next step in currency evolution.
Today, there are over 10,000 cryptocurrencies with a market cap of close to 2 trillion. Although most of these currencies have little or no trading volume, the likes of Bitcoin, Ethereum, Tether, Binance Coin, and Cardano are rapidly becoming mainstream, with nearly 300 million traders worldwide using them to finance their digital purchases.
Hence, it’s safe to say that the early bird advantage is over. The good news is that it's become significantly easier to learn about cryptocurrencies thanks to the abundance of information in the market. The "not so good" news is that the market is becoming incredibly competitive due to the growing number of platforms and users.
If you’re thinking of going down the crypto rabbit hole in 2022, keep reading to learn five tips on how to start crypto trading on the right foot.
5 Tips on How to Start Crypto Trading
1. Explore Multiple Crypto Trading Platforms
To buy and sell different crypto assets, you first need to create an account on a crypto brokerage facilitating the trade. With cryptocurrencies becoming more widespread, more people are asking what platform they should use to get started. Today, there are hundreds of crypto exchanges and platforms in the market. Here’s how to choose the right one:
§ Authenticity and Security
The first thing you need to ensure is that the platform you opt for is legitimate and secure. The most recommended platforms include Coinbase, Gemini, eToro, and Kraken. Popular brokers include Robinhood, TradeStation, Webull, etc.
§ Purchase Method
The next thing you need to check is the purchase methods different platforms support. For instance, some require deposits via bank transfer, while others support PayPal, debit/credit cards, or only cryptocurrencies.
§ Supported Currencies
Most exchanges mainly support Bitcoin and Ethereum. However, this doesn't necessarily mean you should invest in them. Look for other options according to your trading budget and coin performance. When assessing coin performance, evaluate volatility and growth.
§ Broker, Exchange, or Platform
Another important factor you need to consider is the type of platform you’re opting for. For instance, crypto trading platforms are marketplaces where you can buy and sell different coins. P2P exchanges are designed to support direct interactions and transactions. Crypto brokerage platforms are similar to stock trading platforms on which you can set prices and purchase/sell cryptocurrencies like stocks.
§ Fee Structure
Your net profit could be affected due to transaction fees exchanges charge. So, make sure you thoroughly compare different platforms according to their fee structures.
2. Try Not to Withdraw Money Before Two Years
Most new traders get tempted to withdraw their money as soon as they profit or learn about negative market developments. Instead of withdrawing money in case of emergencies, you should avoid allocating a significant amount initially.
The worst thing you can do as a trader is sell your position at an inopportune time just because you suddenly needed money for travel, a new car, or maintenance. Ideally, you shouldn't invest more than 30% to 50% of your total savings on crypto trading so you can ensure you can have a two-year vesting period at least.
3. Learn When to Fold
Like most newbies, you might make errors, especially in reading the market, and then try to compensate for the mistake by increasing the bet size. Loss is the only thing guaranteed in trading, so you should be focused on increasing your win to loss ratio, not just winning. Simply put, if you catch a bad break, it's better to fold and step aside for a couple of days.
This way, you can minimize the psychological impact of your loss and maintain your ability to think rationally when you return after a short break. A majority of losses are due to emotional or reckless decisions. So, when you lose, go out for a walk, spend time with your family, and do things you love. As the saying goes, there are no bad days – some are just better than others.
4. Avoid Using Too Many Indicators for Analysis
As you go deeper down the crypto rabbit hole, you’ll come across several technical indicators, such as the relative strength index, Fibonacci Retracement levels, and moving average, to name a few. You’re only going to burden yourself by using too many indicators for technical analysis. As traders get better, they learn that there’s more to successful trading than using several indicators.
More importantly, they start playing to their strengths. For instance, some like to track correlations to traditional markets while others improve their price chart reading skills.
5. Rules Scmules
If there was a universal guide to successful crypto trading, most traders would have been millionaires today. Therefore, while you need to learn the rules and stick to them as much as possible, you should always be ready to break the rules every once in a while.
Yes, you should invest in winners and follow their advice – but not blindly. Every crypto trader has a different risk appetite and preferences. More importantly, they can also have a bad day. So, trust your instincts and intellect to guide you.
At the end of the day, crypto trading is quite straightforward if you understand the basics and keep learning about market developments. More importantly, you need to be knowledgeable of all aspects related to cryptocurrencies, from the types of coins to platforms, trading tools, and micromanagement.
Finally, don’t be afraid to take risks and test different options initially to understand how things work. Crypto trading, like many trades, involves learning on the job.