Crypto Trading

10 Golden Rules Of Crypto Trading Every Trader Should Follow

What is Crypto Trading?

Crypto trading is the buying & selling of bitcoins and altcoins, usually in a crypto exchange marketplace. Crypto trading offers many benefits for the global economy, like lower transaction fees and protection against identity theft.

Crypto trading has gained popularity in recent years. Data from various reports show that there are more than 100 million crypto users worldwide. This is a steady increase in the last two years, and the count is growing each day, mainly because of the hefty profits the crypto market provides.

However, not all traders are profiting from cryptos. Lack of knowledge, emotions, unsuitable investments, blind trust, and many more things have led many people to lose their money and eventual downfall. We have prepared a list of 10 golden rules every crypto trader should know to make better decisions and cut down losses.

Trader Vs. Investor

DIFFERENCESCRYPTO TRADERCRYPTO INVESTOR
PeriodShort-termLong-term
FrequencyDay Trade & Swing TradeHODL
RiskRisk-takerRisk-averse
AnalysisTechnicalFundamental
ProfitPrice Fluctuations, Airdrops, Hard ForksLending, Airdrops, Price Appreciations, Hard Forks, Coin Burns

Rules To Become A Successful Trader

Rule 1: Have A Trading Strategy

“It is important that you follow only your trading plan to trade cryptos.”

A trading plan or strategy helps you survive the crypto market’s volatility and get maximum profits. It consists of your entry & exit points and risk & money management conditions for every trade. Therefore, it is essential to have a solid working trading plan.

You need sufficient subject knowledge to create a trading strategy. While you can do your own research or copy professional advice to create a plan, backtesting helps you identify its efficiency. In backtesting, you can put the plan for practical use, test it, check the results, and then use it in actual trading.

Rule 2: Use Credible Platforms

“Before you begin trading on a platform, read its Terms & Conditions and the Security measures it uses to shield against potential threats.”

You can trade cryptocurrencies on crypto exchange platforms or P2P marketplaces. But remember to check the credibility of the platform you are using. Many years back, the crypto market was known for Ponzi schemes and exchanges looting traders’ money.

Another major downside of new traders entering the market is that they fall prey to the increased number of scams and frauds.

But not anymore. Thanks to the new crypto regulations that keep the exchange platforms in check while simultaneously protecting users’ personal and financial data.

Rule 3: Invest In What You Understand

“It’s a significant factor that you always invest in what you understand.”

A lot of pump and dump schemes have been circulating in the crypto market recently. They lure traders by promising 100 or even 1000 times returns on a minimal investment. Don’t fall for the overnight rich schemes.

Before buying a cryptocurrency, you have to learn about it, like the project scope, the technology used, the use cases in the future, the team behind it, and how good is their community engagement. Besides, it is also essential to understand the basics of charting, whale manipulation, and other common crypto activities.

Rule 4: Risk-Reward Ratio

“Invest only what you can afford to lose.”

If you are a crypto player already, you would have seen the above quote often. The crypto market is a double-edged sword (it has both upsides and downsides). Its high volatility can provide 10X to 100X returns and more, or you may end up losing all your money.

‘Risk only what you can afford to lose.’ You need to take this into serious consideration. The Risk-Returns ratio compares the potential returns to the possible loss of a trade.

You should risk only the amount you are ready to lose, meaning even if you lose the invested money, it shouldn’t affect your livelihood. For instance, if you have a risk-reward ratio of 1:3, it means you’re risking $1 to make $3. In case things go south, you lose your $1. So make sure that you risk the amount you can afford to lose.

Note: You should not take loans to invest or trade.

Rule 5: Have A Stop-Loss

“Stop-loss is a necessary tool for every trader.”

A stop-loss amount or percentage limits the loss of a trade order by automatically liquidating the cryptos once the market price reaches the preset value. You need to set a stop-loss at the correct point to avoid being exposed to potential losses.

Rule 6: Learn The Market

“Trading requires life-long learning. Master it! Benefit from it!”

Many people enter the market with a lack of technical analysis & research and irregular trading systems. Some traders follow crypto whales on social media, subscribe to poor trading signals, or set up a formula of their own, and finally end up losing all their money.

Learning the ins and outs of the crypto market is more accessible now. The Internet is flooded with resources to improve your trading skills. Many digital portals and social media platforms offer innovative ways to view and analyze the markets. Getting market updates regularly and understanding charting allows you to place effective trade orders.

Rule 7: Never FOMO, DYOR, and Avoid FUD

“Fear Of Missing Out; Do Your Own Research; Fear, Uncertainty, Doubt.”

FOMO means fear of missing out. You should never buy in FOMO – buying at an all-time high and then selling at an all-time low. As you know, the crypto market is volatile, so expect dips, have patience, and trade wisely.

DYOR – Do Your Own Research! Before you buy or sell a crypto, you need to know everything about it, like the team behind it and what utilities it provides. Don’t take others’ words or random advice for trading.

FUD means Fear, Uncertainty, & Doubt. FUD is caused by some crypto whales and manipulators who influence beginners and inexperienced traders by spreading rumors and creating fear about a crypto. Don’t fall for it!

Rule 8: Portfolio Diversification

The crypto market has 5000+ crypto coins and tokens. When you have a solid trading plan and a good amount of money, you can gain the most out of the market by diversification techniques. Diversifying your crypto portfolio is proven to help you generate higher profits.

You can split your funds and invest in two or more cryptos instead of focusing on a single coin. Besides, a lot of exchanges offer.

Rule 9: Take A Break

“It’s OK not to trade sometimes.”

If you experience losses repeatedly due to flawed trading plans or irregular trading patterns, then it’s better to stop trading for a few days or weeks. Once your mind is clear, create a new trading plan and this time, make sure it won’t fail. You can also get a little bit of help from experts or opt for bot trading. Do remember that an ineffective trading plan can be easily solved – no need to end the trading.

Rule 10: Trading = Business

“As a trader, you must research and strategize to maximize your business’s (trading) potential.”

Last but not least, you must consider trading as a business rather than a hobby or a 9-5 job. The crypto market is open 24/7, and no one knows when the right opportunity would knock. So you need to upgrade your skills and have full-pledged dedication. Since it’s a business, trading has its own expenses, profits, losses, taxes, uncertainty, stress, and risks.

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