If the words cryptocoin exchange rank somewhere in your head with thermonuclear astrophysics – and not even the fun kind with Tony Stark in it – then you should reevaluate your outlook. You’re leaving money on the table. For a sense of how much, the cryptocurrency market is currently worth more than JP Morgan.
Yes, that’s JP Morgan!
The exchange isn’t astrophysics. You’re just making it harder than it needs to be. Here are eight tips you’re definitely not doing and definitely should be doing to make your life easier.
1. Understand the Power of Cryptocurrency
With great power comes great responsibility.
Uncle Ben knew it. Obviously, so should you.
It starts with knowing the power of the cryptocoin exchange. See, we have a tendency to equate the bitcoin exchange to stocks, except that cryptocurrency isn’t a stock – it’s an asset.
Actually, the only similarity between the stock exchange and the coin exchange is…well, the exchange.
Except, not really. Some cryptocurrency exchanges, the most popular ones, are centralized. But, newer exchanges are becoming decentralized, which means they can’t be shut down or manipulated easily. Decentralized exchanges offer more security to the investor. This trend will likely continue.
Free yourself of the belief that cryptocurrency is like stocks. You’ll already be one step ahead of everyone who hasn’t quite figured that out yet.
2. Have a Reason for Entering Each Trade
We’re not saying every trade happens for a reason. We’re saying every trade should happen for a reason.
There are little fish traders and there are big fish traders. If you don’t know which one you are, you’re a little fish trader.
In this case, your best chance is to go into every trade with a clear idea of why you’re doing it and what your strategy is. Otherwise, you will get eaten. Or your coins will.
The coins getting eaten will hurt worse than you think, especially since bitcoin passed the $10,000 mark. Those coins don’t come cheap anymore.
Chances are, you don’t have the capital or spare cryptocurrency sitting around to make foolish mistakes. Pro tip: don’t make foolish mistakes.
Go into every trade with a gameplan. Or know when to look at the exchange and not make any trades for the day.
3. Understand Market Conditions
And while we’re on the subject of watching the exchange, let’s have a chat about market conditions.
Listen. The cryptocoin exchange is volatile. Bitcoin is a volatile asset. If you don’t treat it that way, it will teach you to treat it that way pretty quickly.
The basic premise is this: bitcoin and altcoin have an inverse relationship to their value, which sounds counterintuitive. Basically, when bitcoin is more valuable, then altcoin is less valuable, and vice versa.
Oh, and when bitcoin is volatile, we tend to get a bit foggy on market conditions.
You know what you don’t do in a fog? Drive in it. Don’t trade in it either.
4. Have a Target and Stop-Loss Level
This fits in with having a reason for entering every trade.
You should also have a target and a stop-loss level. Because if the cryptocoin exchange is about anything, it’s definitely about strategy.
It’s sort of like blackjack. You want to get as close to 21 as you can without exceeding it, but you also want to be closer to 21 than the dealer.
Your target refers to your clearly articulated goal for profit for the day.
Equally important is your stop-loss level, which is the cutoff point for losses.
This is where most traders stumble. They fall in love with the trade and the coin and they get attached. And as soon as that happens, they lose sight of their stop-loss level.
Remember: cryptocurrency is far more volatile than the stock market. Volatile movement in the stock market is 2-3%. Cryptocurrency can see up to 80% in just a few hours.
And if a dump like that happens, you don’t want to be the last one holding your coins.
5. Hedge Your Bets
In other words, make use of the fact that you can bet on either side of bitcoin’s movements.
This fact can work to your advantage if you know how to play it right. Or, you know, how to play it at all, which is the minimum you should be able to do.
Let’s say you have 90% long and 10% short. This assumes you’re more confident (by no small margin) in the long position.
There’s also something to be said for increasing your cryptocurrency investments over time.
Essentially, you’re planning ahead of the version of you that will want to buy and sell often, because it reduces the pain of sudden price changes when you only have one point of entry into the exchange.
It’s like any other form of investment: diversify your portfolio. Or, in this case, diversify the time you buy your coins.
It’s hard to know what’s the best time to buy. You have to trust your gut on this one.
6. Know a Thing or Two about Altcoin
Basically, you should understand the power of the types of cryptocurrency that are not bitcoin.
Also known as altcoin.
Because they’re, you know, not bitcoin, they’re less prone to public speculation. Which also means they have smaller market caps which are prone to larger price swings.
Of course, with greater risk comes greater rewards. And that, friends, is the hidden beauty of altcoins.
And if you don’t trade in them at all, you’re cutting yourself out of an opportunity to cash in on those larger rewards.
Do yourself a favor. Get to know your altcoins and which niche altcoins are best suited to your needs and interests.
Learn to Work the Cryptocoin Exchange
You can’t work the cryptocoin exchange if you never properly learn how it works.
No time to learn like the present.
Check out the blog for a range of tips on how to make the cryptocurrency market work for you, like this post on how to get free coins, or this post on how you lost $1,100 in free money (for shame, sir, for shame).
Got a cryptocurrency question that isn’t answered here? Head on over to the contact page to get in touch.
*This is a guest post, courtesy of the writing staff at OK Calculator. OK Calculator has over 100 useful free calculators.
Filed Under: Cryptocurrencies Tagged With: cryptocurency, exchange