Trade rather than gamble
The uncertainty of the outcome is something that both trading and gambling have in common. On both playing fields, a bet is placed and the outcome is awaited. Risk management, on the other hand, distinguishes a trader from a gambler. This means that purchasing digital currencies without first assessing the risk is akin to gambling.
With cryptos being the epitome of volatility, the uncertainty grows exponentially more than with any stable security. As a result, it is even more critical for crypto traders to have a solid risk management strategy in place. It appears logical for a trader to use stop-loss orders and only risk an amount that he or she is comfortable losing on the trade.
Concentrate on Liquid Currencies
Despite the fact that thousands of cryptocurrencies have been created and listed on cryptocurrency exchanges, not all of them are worth trading due to a lack of liquidity. Liquidity is an important factor that allows short-term traders to easily enter and exit a position.
The lack of liquidity in some cryptocurrencies limits traders' agility. This makes getting into and out of a large position difficult for them. The liquidity also influences the impact cost, which raises the overall cost of trading. As a result, it is critical for a trader to trade such cryptocurrencies in markets where there is already a sufficient volume of trading.
Manage Your Emotions
Even with a good trading strategy, primary emotions such as fear and greed can turn the results upside down. When a trader experiences large swings in his profit and loss account, which is quite common with crypto holdings due to their erratic movements, such emotions tend to escalate.
Working on trading psychology while controlling greed and fear appears to be beneficial for traders looking to profit in the cryptocurrency market. Furthermore, traders must have the discipline to stick to their respective trading plans and understand when to book profits and losses.
While these pointers can assist crypto traders in avoiding common blunders and shortening their learning curve, they are not a replacement for extensive experience. As a result, it is critical for traders to continue learning throughout their investing careers in order to become proficient in crypto trading. Remember, "when it comes to investing, the market is the best teacher"!