Crypto trading has become an essential part of more than a million people’s lives. While most countries are lifting the ban issued on crypto trading, a few of them are already involved in developing a CBDC (Central Bank-issued Digital Currency) backed by their national currency. Not only trading but a lot of crypto-related activities have been gaining traction in recent years.
Crypto trading and stock trading have their differences. The crypto market is highly volatile – the prices fluctuate most of the time, and predicting the prices is a tad difficult. And as traders, we need to understand how the market works and how we could make money from it. To be precise, we need to follow certain golden rules of crypto trading to become successful traders.
What is Crypto Trading?
Cryptocurrency trading is the buying and selling of crypto assets between participants on an exchange platform. The crypto market is open 24*7, and people can trade continuously. With more than 5000 crypto coins in circulation, the interest in crypto trading is constantly evolving worldwide. And to back this revolution, crypto exchanges are providing various opportunities for users to facilitate crypto trading.
How to become a Crypto Trader?
A crypto trader is someone who buys and sells cryptocurrencies for profits. Crypto trading can be lucrative if done right. Having a passion for trading and making money off it are two common interests of many traders. But only a few are willing to adopt professionalism in their trading methods.
Cryptocurrencies don’t depend on centralized systems or banks; they are regulated by a set of algorithms. With this extreme advantage, more people are shifting towards crypto trading. To become a successful crypto trader in 2021, one should have proficient knowledge of the ins and outs of the crypto market. He/she should be ready to spend sufficient time and invest resources in trading. Here, we will be describing a few (but necessary) trading rules for the benefit of wannabe traders.
What not to do in Crypto Trading?
#1 Trading without a proper plan is like starting a journey aimlessly. You’ll never reach your destination, and eventually, you’ll get lost. So you will need to have a strategic trading plan (and some backup plans and expert traders’ advice too).
#2 Trading without a Stop Loss is like riding your motorcycle without a helmet. Avoid using stop loss, and you will soon start losing yourself. When setting a stop loss percentage, you need to set less than 2% of your actual amount.
#3 Don’t put your funds in random cryptos because your friend suggests them or you saw a social media promotion. DYOR – Do Your Own Research! Before you start trading, you need to know everything about crypto, like the team behind it and what utilities it provides.
#4 FOMO – Fear Of Missing Out. It has led many people down the road to disaster. Everyone wants to invest in skyrocketing crypto and rake in quick profits. But luck doesn’t favor all. So make sure that you’ve thoroughly researched the crypto assets before investing in them.
How To Make Your Trading Effective? (A Simple Rulebook)
The crypto market is highly volatile, and the prices never stop fluctuating. Traders need to adopt strict habits and rules to mitigate losses, increase profits, and establish an effective trading strategy.
1. A Trading Plan is a Trader’s Best Friend
A trading plan specifies a trader’s entry & exit points and money management criteria for every trade order.
Backtesting allows traders to apply their trading strategies using historical data and determine if they are viable. With an ocean of information on the Internet, it is easy to test your trading strategies. Once backtesting is successful, the strategy can be applied in real-time.
“No matter what, always stick to the plan.”
2. Trading is like a Business
To become successful, a trader must consider trading as his/her business rather than a job. It requires one’s entrepreneurial skills and full-pledged dedication. Since it’s a business, trading has its own expenses, profits, losses, taxes, uncertainty, stress, and risks.
“As a trader, you must research and strategize to maximize your business’s (trading) potential.”
Traders can easily improve their skills with the help of the Internet. The Internet has many online platforms that give traders innovative ways to view and analyze the markets. Getting market updates regularly and understanding charting allows traders to place trade orders effectively.
“Using technology to your advantage, and keeping updated with new products, can be fun and rewarding in trading.”
4. Know RRR (Risk-Reward Ratio)
‘Risk only what you can afford to lose’ – every crypto trader should understand this. R/R ratio is the standard measure used to compare the potential returns to the potential loss of a trade.
A trader should risk only the amount he/she is ready to lose, and this applies to both cryptos and stocks. If you have a risk-reward ratio of 1:3 (usually recommended), it means you’re risking $1 to make $3. Make sure that you Risk the amount you can afford to lose.
“Imagine what pain would it cause if a trader loses his funds that were meant for other expenses.”
5. It’s OK to Change
If a trader faces consecutive losses in trading or the plan doesn’t go as expected, then it’s better to reevaluate the trading plan and make a few alterations to it or formulate a new trading plan.
“An ineffective trading plan can be easily solved – no need to end the trading business.”
6. Stop Loss is the Ultimate Key
A stop-loss is the risk percentage that a trader can afford to lose with each trade order. The stop loss is usually an amount or a percentage limiting the trader’s exposure during a trade.
“Using stop loss helps to cut down losses and risks to a great extent.”
This article is a practical revelation of things that traders should understand to become successful. Other than those things mentioned here, there are other guidelines that traders need to adopt to establish a profitable trading business. Do follow us and get the latest information on crypto trading.
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