New to crypto trading? Here are 5 tips on how to start 2022 on the right foot
It doesn’t matter how skilled a trader you are; there is nothing that can shield you from the volatility of cryptocurrency prices. Bitcoin’s (BTC) volatility, which is a common measure of daily changes, is now at 64% annualized. In comparison, the S&P 500 has a volatility statistic of 17 percent, while WTI crude oil has a volatility spec of 54 percent.
However, by following five simple guidelines, you may prevent the psychological effects of an unexpected 25% intraday price movement. Fortunately, holding these strategies during periods of extreme volatility does not need specialized technologies or big quantities of money.
Plan to refrain from withdrawing money in less than 2 years
Let’s say you have $5,000 to invest, but you’ll almost certainly need at least $2,000 of it during the next 12 months for vacation, automobile repair, or some other purpose.
The worst thing you can do is make a 100 percent crypto allocation since you could need to sell your investment at the worst possible time, such as at the bottom of a cycle. Even if the revenues are intended for use in decentralised finance (DeFi) pools, the danger of impairment losses or hacks that threaten access to the money exists.
In a nutshell, any assets dedicated to cryptocurrencies should have a vesting time of two years.
Always dollar cost average
Fear of missing out (FOMO) may engulf even skilled traders, leading to a rush to create a position as rapidly as feasible. But how can you just sit back and watch when everyone is making 50 percent or more returns on a continuous basis, even meme coins?
The DCA approach is buying the same dollar amount every week or month, regardless of market fluctuations; for example, buying $200 every Monday afternoon for a year eliminates the stress and worry associated with deciding whether or not to increase a stake.
At all costs, avoid purchasing all of the positions in less than three or four weeks. Keep in mind that cryptocurrency use is still in its infancy.
Don’t use too many indicators when conducting analysis
The moving average, Fibonacci retracement levels, Bollinger Bands, the directional movement index, the Ichimoku Cloud, the parabolic SAR, the relative strength index, and other technical indicators are only a few examples. There are countless ways for tracking these indicators when you realize that each one has different settings.
The finest traders are aware that accurately reading the market is more essential than selecting the best signal. Some people like to look at correlations with traditional markets, while others only look at cryptocurrency price charts. Except for trying to follow five separate indications at the same time, there is no right or wrong here.
Markets are dynamic, and this is especially true in crypto because of how quickly things change.
Learn when to step aside
You will eventually misread the market while looking for bottoms or cryptocurrency seasons. Every trader makes mistakes from time to time, and there’s no need to compensate by increasing the bet amount quickly to make up for the losses. This is the polar opposite of what one should be doing.
When you have a “bad break,” take a break for a few days. The psychological toll of losses is significant, and it will impair your ability to think properly. Allow that one to pass even if a clear chance presents itself. Aside from trading, go for a stroll or try to manage your life.
The most successful merchants aren’t always the most gifted, but rather the ones who have survived the longest.
Continue to invest in winners
This may be the most difficult lesson to learn since investors have a natural desire to profit from our winning positions. As previously said, crypto market volatility is highly high, thus aiming for a 30% return will not be enough to compensate for your prior (or future) losses.
Traders should buy more wins instead of selling losers. Of course, market data and overall mood should not be ignored, but if your expectations remain strong, try adding to your position until the entire market shows signs of weakness.
By being bold and holding on to the most profitable positions, one may finally make a 300 percent or 500 percent profit. Don’t be alarmed if you see these returns because you expected them when you entered such a hazardous market.
Every rule is meant to be broken
If there was a path to bitcoin trading success, many individuals would have discovered it after many years, and the profits would have faded rapidly. That is why, every now and again, you should be willing to break your own rules.
Do not blindly trust investing advice from influential people or skilled money managers. Everyone’s risk appetite and capacity to increase positions following a setback are different. But, more importantly, remember to look for yourself while you’re out there!