How to start trading cryptocurrency chapter 2

Live trading

Digital asset trading is a very risky craft. The price of cryptocurrency is unstable, it can fluctuate 10-20% per day, sometimes up to 50% or more. For example, on March 12-13, the price of bitcoin fell from $8100 to $3800. In this case, an inexperienced user may be under the impression that trading can generate huge profits almost every day. However, practice shows otherwise, as a rule, 90% of new entrants lose most of their capital in the short term and leave the market.

For this reason, it is better to start trading cryptocurrencies with a practice account. This will allow you to become familiar with the market and the structure of the commercial platform, and practice.

Then you can apply for a small amount on the exchange. Loss is unavoidable, but this is a mandatory stage in becoming a trader. Beginners should feel what it is like to lose money and maintain a losing position. This will help the user understand his psychology: whether he is able to suffer losses and not panic, make wrong transactions, control himself, and make decisions with a cool head. It is better to acquire these skills first, without paying a lot for such experience.

In addition, you should definitely turn to theory. For example, reading scientific literature on trading, listening to lectures on this topic, taking appropriate courses, getting acquainted with technical and fundamental analysis. All this will help not only to see the rise and fall of the asset price on the chart, but also to try to predict it.

When studying the literature and experience of other merchants and investors, it can also dominate several commercial strategies. One of them is average. It involves dividing the capital into several parts and investing in small amounts of assets. This method will help you find the optimal point of purchase for the asset.

Average is the basic and probably the simplest strategy. Apart from that, there are also trading of levels, catching "lumbago" and "false breakouts" and others. We have analyzed it in more detail in a separate article.

What not to do

In this case for beginners, it is better to familiarize yourself with the experiences of others in advance to avoid unnecessary losses. To do this, we have prepared some rules that every novice user should follow.

Don't buy cryptocurrency on the news. As a rule, if the user finds out about some news that is supposed to lead to an increase in the price of the coin, then this probably already happened. If you buy it, be sure to use a stop loss order. This is an offer to sell a coin for a certain price. 

Do not be greedy. If you manage to buy bitcoin for $9000, after that the price goes higher, it's safer to sell some coins, and put the rest on a stop loss.

Be careful or don't trust other people's signals to buy and sell assets. Currently, there are many channels on Telegram and other social networks that publish cryptocurrency predictions. Their authors are not responsible for their customers' money.

Don't give capital to anyone, especially strangers, for trust management. And if you do this, then only with the conclusion of the contract approved by a notary. This practice has been popular in the crypto world for several years and often has a negative impact on inexperienced traders.

Don't give in to emotions. Most losing trades occur precisely because of a loss of control.

Do not trade with the last of the money, much less with borrowed money. Making money in the cryptocurrency market is difficult, but for novice traders it is almost impossible. For this reason, you should invest only funds that you don't mind losing. 

Always have funds on hand if the price of the asset drops below the level when you bought it.

Don't neglect training. Trading in the cryptocurrency market is not a casino, but hard work and nervousness. It can take years to understand how asset prices behave in certain situations.

Record your trades. This will help evaluate and improve trading strategies, as well as identify errors which are made.

Learn not to lose and recognize losses. If you're not sure about the deal, it's safer to close it and wait for another good moment. It's better to donate a small amount of capital to the market than to be stuck in a bitcoin bought for $20,000 for several years and lose the opportunity To buy for less than $ 3,900 twice.

The cryptocurrency market hates games of luck. Here the traders compete: retail and wholesale. Some take wins, others leave the market empty-handed, and sometimes with debt. Therefore, you need to take digital asset trading seriously, calculating each step and thinking about the possible negative consequences.