6 Tips for Avoiding Losses When Trading Cryptocurrency

Sep 13, 2020 at 10:54 // News
Coin Idol
A trader must keep a cold head to avoid losses

Any business carries a risk and so is cryptocurrency trading. The digital currency market is volatile, so a trader has to come up with a calculative approach to use in leverage trading.

When digital currency trading is conducted in a proper way and at the right time, it is very lucrative. The higher the risk, the higher the profit. The risk involved in trading digital currency such as Bitcoin (BTC) with leverage is somehow dicey than spot transactions.

However, if investors and users develop proper strategies, it becomes easy for them to protect themselves against heavy losses and this puts them at high chances of making and increasing the profit potential on every transaction, trade or investment they conduct.

Begin with small size and go slow

When you begin any business, it is important to take yourself as a student. This helps you to realize that you actually know less, and from there, you can now seek for more knowledge related to your business or investment.

It is better to first invest little money in any digital currency as you do monitor the trend of that particular coin. Most people tend to rush to invest in a cryptocurrency when they start seeing it making ridiculous gains. They actually start regretting why they never invested in it in the first place. Due to the fear of missing out, they tend to get excited and rush to invest in that coin to leap big when actually it’s the time when the market is going to experience the lows.

If you want to be the most profitable digital currency trader, then know that patience is needed in this game – so it is recommended that you start with a small size and then move slow before investing in heavy funds.

Make a plan

Always have a game plan and see which tactics you will use to achieve a win. Not everything that you have to gamble. Set plans that will help you in professional trading.

Look at all the possibilities and probabilities – the digital currency industry lacks absolutes.  You need to know the type of trade set-up you will use or go for. Learn and understand the rules of the game before you play.

Before going for leveraged trading, first learn how to trade the spot market

In spot markets, there is just buying and selling of products. In leveraged trading, a trader can grow the scope of his trades with a deposit as margin. You can’t make losses in the spot markets and then expect to leap profits when you upgrade to leveraged trading – cryptocurrency traders tend to use huge leverage and they end up registering losses. When a trader uses leverage, one will increase one’s gains and losses.

Position sizing

Traders and investors need to position size their trades and investments properly. When traders invest all of their money at once when the price of digital currency is high, they will be left with no single coin to buy or invest in when the price of the crypto is low. Yet when the price is low, that’s the best time to buy and invest, and then wait for the price to surge so you can withdraw your profits.

Therefore, it is wise to be very conservative on your money until when you see that the prices are extremely very low. Avoid acquiring debts to invest in cryptocurrency – they are highly volatile. It is very painful to continue paying back the loan/debt when you actually never accumulated any profit.

Invest in fiat currency when the price of cryptocurrency is high

When you buy or invest in a cryptocurrency when its price is very high, a trader will make less profits in it when one decides to sell it. But when a trader buys a crypto when it's having a low price and then waits until the price surges and then sells it, one will automatically leap big.

So, in this case it is better to invest in fiat currency such as dollars since they are more stable as you wait for the price of the cryptocurrency to plummet so that you can buy it cheaply (at low price) and sell it at its highs.

Keep a cold head

Any successful trader will always go for a profit over a loss. The trader has to first calculate and see whether the trade will bring in a profit or a loss. If one finds that it is a loss, then one shouldn’t be driven by emotions to sell, but if one measures and finds that it is generating a profit (big or small), then one can complete the transaction or a trade.

Unsuccessful traders will always dive into the crypto-pool without checking to see whether there is water or not. Emotions don’t work in cryptocurrency trading otherwise you will keep making repeated trades with the aim of recovering back your money at the end of it all, you will be left with no money hence registering total losses.

Always use alerts in your cryptocurrency wallets to notify you when the prices go high or low, such that you can come and make transactions with a clear mind.

Make appropriate inspections on the market performance, charts, technical analysis, price movements, ultimate analysis, and objective-powered risk management strategy.

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