Cryptocurrency trading for beginners is a daunting prospect. There is so much information out there about cryptocurrencies and how they function as an actual currency. But there is so little out there that tells you how you can actually make money from them. Here are 21 tips you can use immediately to improve your trading if you’re new to cryptocurrency trading.
1. Learn Technical Analysis: Cryptocurrency trading is almost entirely technical analysis. Technical analysis by definition is using patterns in market data to identify trends and predict future price action. Trading cryptocurrencies without knowing technical analysis is like trying to trade blind.
2. Study Cryptocurrencies Before Risking Your Capital: Most great traders studied markets for months before putting any of their capital to risk. It is no different for you. You need to understand how cryptocurrencies move, know what they are, and develop a strategy on how you will extract income from them. Trading is no different than any other profession. You need to get an education and develop competence before you can make money.
3. Discover The Best Style Of Trading For You: There are so many ways to make money trading. You need to figure out what style of trading is best for your personality, trading capital, and your time commitment. Are you a day trader that does short term holds? Are you a swing trader that holds your positions for days/weeks? Or are you a long-term investor that will be holding for months/years? You need to figure all of this out before putting your capital into the cryptocurrency markets. Cryptocurrency trading for beginners is about learning what style suits you best for making money from the markets.
4. Trade Small In the Beginning: There is no reason to be trading with large position sizes until you can prove you can consistently extract income from the markets. Trading is not about making 6 figures in the beginning. Cryptocurrency trading for beginners is about proving that you can execute a strategy consistently over a long period of time and maintain a positive expectancy.
5. Risk Proportionally To Your Account Size: You should only be risking 1%-5% of your trading capital per trade (depending on your risk tolerance and account size). This will prevent you from blowing up your account in a single day, and take a lot of the emotions out of your trading. A lot of fear can be removed from your trading by reducing your position sizes to quantities you are not emotionally attached to.
6. Make A Trading Plan Before Entering The Market: Before every trade, you should know what price you will enter at, where your stop loss will go, and where your first profit target will go. Trading without a plan will cause you to trade without a lot of emotion because there is so much uncertainty. It’s better to not trade at all then to trade without a plan.
7. Learn From Experienced Traders: “It’s good to learn from your own mistakes. It’s better to learn from other people’s mistakes.”- Warren Buffett. There is no reason to make all the trading mistakes yourself when you can learn from other experienced traders. Learning from experienced traders will save you time, money, and exponentially reduce your trading learning curve.
8. Don’t Follow Others’ Trades: Successful and consistent trading can only be found by developing your own strategy and edge. Everyone has different amounts of capital, different personalities, risk tolerances, and time commitments. Following others’ trades will not work in the long run because you do not know their trading plan. You will always be trading with fear because you don’t have a trading plan.
9. Obey Your Stop Losses: Cryptocurrencies are so volatile that your trading account can be wiped out in a few hours if you do not use stop losses. You need to obey your stop losses so you can survive in the long run. 1 bad trading day can wipe out a months worth of gains if you do not mitigate your risk to the downside. Cryptocurrency trading for beginners is about survival, and obeying your stop loss is crucial for this.
10. Know How Much You Will Risk Every Trade: You should know exactly how much money you will be risking every trade you take. This will allow you to figure out how many coins you will be buying for your trade. For example, say you risk $200 per trade and you are looking to long LTC at $150 with a stop loss at $140. In this case, you would buy 20 LTC. 20 LTC at $150 is worth $3000, and 20 LTC at $140 is worth $2800, so 3000-2800= 200. You are risking $200 on this trade.
11. Sell At Resistance: Resistance is a price point where sellers have historically come in and pushed the price back down. You need to learn technical analysis so you can identify where these points are on the cryptocurrencies you trading. These are good spots to sell all of or part of your position because there is a lower probability of the cryptocurrency heading any higher than here in near term.
12. Buy at Support: Support is the opposite of resistance. It is a price point where buyers have historically come in and pushed the price back up. These are good spots to enter your positions because you can get better risk versus reward. It is a good idea to put your stop loss right under support levels.
13. Don’t Chase Entries: Chasing entries can often result in you getting emotional and taking big losses. When you buy too high, you greatly minimize your potential profits and increase the size of your potential loss. You need to learn to wait for pullbacks to find entries with better risk versus reward. Wait for pullbacks to the intraday moving averages to give you better entries.
14. Sell Into Strength: Our instincts tell us to buy things when they are going up and selling things when they are going down. To succeed as a trader, you have to be selling when everyone is buying, and buy when people are selling. Cryptocurrencies are so volatile that if you do not sell into strength you risk giving back some large unrealized gains.
15. Buy Dips in An Uptrend: Buying dips in an uptrend will give you much better risk versus reward on your trade and increase the size of your winners. You should buy dips off of prior support levels on uptrending cryptocurrencies.
16. Take Partial Profits: Selling half of your position when you are up nicely on a trade is a great way to pay yourself while keeping yourself in a position to capture a bigger move.
17. Move Your Stop Loss Up To Keep Profits: Once you have a big cushion on your position and have sold some of your shares, you can move your stop loss higher to keep more of your gains. We will often move our stop losses to support levels near our by price once we have locked in part of our position so that no matter what our trade will be a green one.
18. Don’t Micromanage Your Trades: The best trading is simple trading. Once you enter your position, don’t do anything unless it hits your stop loss, or your first profit target. Watching every tick of the crypto you’re in and thinking to yourself “Should I sell?” will add a lot more stress and emotion to your trading.
19. Journal All Your Trades: Every successful trader tracks every single trade they make. You will never succeed in trading in the long term if you do not do this. You will not know where your edge is or improve your strategy if you do not document all of your trades. You should be tracking every setup you take, your entry price, your sell price, and your daily, weekly, monthly PNL at the very minimum. We show you the best way to journal trades in our bootcamp.
20. Know When Not To Trade: Profitable trading is just as much about having few/small losing trades as it is about big winners. Knowing when not trade will save you thousands of dollars over the course of your career. It is better to be flat than to be red. Cryptocurrency trading for beginners is about being very selective with the trades you take.
21. Focus on Mastering A Few Setups: Trading, in the beginning, is about mastering a few setups that you can rely on every week to bring you income. These setups are the setups you have the best win percentage on. Once you can relay on one setup to consistently generate money for you, you can slowly start to add other setups to your arsenal. No matter what, you need a go-to setup that will make you money on a weekly/monthly basis.
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