2018 has been quite a volatile year for cryptocurrency markets. So far, there have been one major flash crash and several bear markets. Despite this, several traders are still in the green year to date. Here are a few tips I have learnt from trading so far.
- Go big
One of the biggest mistakes I have made while trading cryptocurrencies is not going big. If you are sure about how much a coin should be worth, then bet big on it. “Big” varies according to one’s budget. For me, a big position would be holding 10,000 to 1 million coins. If you cannot afford that, then the minimum one should hold in a trading position should be 1000 coins.
- Cut your losses quickly
There is absolutely no need for holding on to a loss making position. If a coin has not performed to your expectation, then sell down. Do not develop emotional attachments to any coin. You will make losses in trading. It’s like falling off a bicycle, or the car veering off when learning how to drive. Take your loss and move on.
The most important thing is to know why you were wrong, and learn from it. Did you buy a coin at an all-time high or low? Did you buy a coin with absolutely no fundamentals?
- Do not be greedy with gains
While 100% is child’s play in the world of cryptocurrencies, you do not have to ride a coin all the way. A 30 or 40% profit could turn to a negative position in a matter of seconds. That loss position could last for a few minutes or 3 months.
The number one objective in trading is to make a significant return on your initial capital.
- Stick to what works for you
Some traders play over 20 coins in a day. Others stick to 3 or 4. Some traders wait for a 30% or 40% profit before exiting a position. Others are content with just 5%, then shutting down for the day.
Stick to what works for you. They all add up. 5% profit every day gives 150% return in a month. 30% profit 5 times in a month gives the same profit margin.
- Convert your profit to fiat
While it is nice to brag about how many bitcoins you have, or how you made 1000% profit on a coin, it all comes to nought if you do not have physical cash. Profits can evaporate over night. Convert some of your profits to fiat, regular currency, or bitcoin as its wallets rarely go on maintenance breaks.
- Do not use just one exchange
The saying that one should not put all eggs in one basket applies when trading. Don’t have all your coins in one exchange. When a coin experiences rapid price appreciation, some exchanges may decide to go on break or maintenance to prevent market manipulation. Others might do this because they cannot handle the volume. This is another reason why you should cash in your profits for bitcoin or fiat.
- There are no breaks
There are no breaks in crypto markets. No 2.30pm shut down like the Nigerian Stock Exchange and no public holidays. Trading is a full-time thing. News around coins plays a major part in price swings. Flash crashes occur – sometimes in one exchange, or across many exchanges. Always keep your ears down for the news. If you can’t do that, buy a few solid coins, set alerts on your phone and cash out when they get hit.
- Do not listen to the crowd
If everyone is excited about a coin, that should be when to sell. The buzz around a coin means price increases have already been factored, and there’s little room left for upside. The coin could also be shilled or hyped because a whale (someone with a large amount of coins) wants to exit.
- Buffetarian rules apply
Warren Buffett may be bearish on cryptocurrencies, but his rules apply. Be greedy when everyone is fearful and fearful when everyone is greedy. Bear markets are the best time to buy coins. When everything looks green on cmc, take a break from the market. Sell down coins you have made a profit on.
- Keep your coins safe
If you are a big time player, you most likely would be a target for hacking, when an exchange is hacked or compromised by malware. Enable 2 Factor Authentication on your device. Get a separate phone and laptop for trading cryptocurrencies. Keep your coins offline in a hard wallet.
There are 365 days in a year. If you get things right, you only need to be right a few times in a year.