01 Cryptocurrency Trading Tips
Tip 1: Make good use of a trading journal
A trading journal is a document that records your trading activity. You can use a simple Excel spreadsheet, or subscribe to a dedicated service. Especially when trading is active, traders consider keeping a trading diary to be essential for continued profitability. After all, how can you determine your strengths and weaknesses if you don't keep track of your trading activity? Without a trading diary, you have no way of knowing exactly how you are performing. Remember, bias can play a large role in your trading decisions, and a trading journal can help mitigate some of that bias. Why is this good for mitigating bias? Because the data is out there, irrefutable! Trading performance is ultimately reflected in numbers, and if you don't do well, the performance will be clear to you. By consistently using a trading diary, you can also see which strategies are working best.
Tip 2: Calculate the size of positions in a trade
One of the most important aspects of trading is risk management. In fact, some traders consider risk management to be the number one priority. Therefore, it is important to use a standardized formula to calculate position sizes. The calculation process is as follows. First, you need to determine how much risk you are willing to take for your individual trades. Let's assume that the risk that can be taken is 1%. Does this mean that you enter 1% of the account amount as the position size? No, it means that if you reach a stop loss, you will not lose more than 1% of your account funds. This percentage may seem a bit too small, but it is done to ensure that the few unavoidable bad trades do not cause irreversible losses to the account. Therefore, after setting a tolerable loss, it is important to limit the stop loss point. Depending on the specific trading strategy, you can set separate stops for each trade. Suppose you determine to set the stop loss point at 5% of the initial buy price, and when the preset stop loss point is reached, you sell at 5% of the initial amount and lose exactly 1% of the funds in your account. Let's say we have an account size of 1000 USDT. We risk 1% on each trade. What size of capital should we use when we enter with a stop loss of 5%? 1000*0.01/0.05=200 If we only want to lose a maximum of 10 USDT, i.e. 1% of our account, then we can put in 200 USDT of capital.
Tip 3: How to be successful in cryptocurrency trading?
The answer is simple, you must be well prepared. A. Gain insight into the market. B. Manage your risk ; C. Follow the news. D. Viewing bitcoin price charts. E. Care about the changing cost of mining.
02 Cryptocurrency Trading Strategies
Strategy 1: Hodl (Hold on to Hold)
Hodl is a basic long-term cryptocurrency trading strategy for every beginner. There are virtually no trading skills or experience required, and practically anyone can do it. The core principle of the Hodl cryptocurrency trading approach is to buy a copy of a promising cryptocurrency and hold it safely for a long period of time, i.e. with the expectation of selling it later. This selling transaction can take place a year, several years, or even decades later. In order for this strategy to work, you need to understand how to buy cryptocurrency and how to store it safely. Most holdouts (hodlers) use cold wallets like paper wallets or physical devices like Ledger or Trezor. But the Hodl strategy has its drawbacks. First, it does not guarantee that your assets will appreciate in the future. Projects may fail, networks may experience failures or other problems, and even better alternatives may emerge in the future. Second, you may lose your private keys, so secure storage is a priority. Finally, it is also important not to overlook the fact that there is no point in surviving the up and down cycles of cryptocurrencies if you are never profitable. For example, if you bought Bitcoin in 2017 at $2,000 and didn't make any sales until the price went up to $20,000, you missed a great opportunity to make an additional $10,000+ as its price would have fallen all the way down to $3,000. Of course, catching the occasional and upward trend is no easy task, but it's not a bad deal when you sell at around $10,000. Even big bull markets in cryptocurrencies can have rallies of nearly 80%, making it harder for reckless traders to liquidate their positions when the opportunity presents itself. Plus, you can always reinvest with profits once the market hits bottom. Yes, long-term gaming is still the main concern here, but don't forget to go for profits whenever possible or at least in case of a significant price increase. This is a smart way to stay liquid and give yourself a treat for your prudent choices. Simply holding without taking profits will only lead to unnecessary and irrational decisions.
Strategy 2: Swing Trading
To become proficient in swing trading, you need to have at least a basic understanding of technical analysis. It will help you to observe the market and be more sensitive to major price movements. Swing trading means making the right move at the right time. The goal is simple - to make as much profit as possible during the cryptocurrency market swing. Whether the price goes up or down, you are always trying to catch potential price moves. For example, if you have a $5,000 Bitcoin position when the market is trending up, you want to increase the size of your position by hedging at the top of the market before it reverses (e.g., switching to USDT), in order to buy again (and switch USDT back to Bitcoin) near the bottom in the short term. The successful swing trader will want to catch some of the expected volatility and move all the way to the next opportunity point, but this will also mean only a few trades per week. The key point of it is to set specific entry points, stops, and profit lines before each trade. Profits of $100 to $200 per trade are possible as long as the time reward outweighs the risk. The market can signal a $1,000 profit, but it is very difficult to catch that opportunity with 100% accuracy. Therefore, the practice of securing profits by raising the stop loss should be a priority for swing trading.
Strategy 3: Day Trading
Day traders are the group of people who make their living trading cryptocurrencies and spend the majority of their time doing so. Whether they are buying or selling assets, trading on margin, or trading perpetual contracts, they trade a lot every day to take advantage of favorable price movements. It can be very rewarding, but it can also be a challenge for newcomers - especially if you have a poor understanding of technical and fundamental analysis or are inexperienced in the market. You may have to go through months or even years of losses before you actually become a profitable day trader. In the cryptocurrency market, day traders must follow charts and pay close attention to price action. Always be prepared to stop losses, break even, and adjust your bias to avoid the pitfalls and losses of being long or short. As a day trader, you must be a friend to cryptocurrency price fluctuations and be able to truly make a living out of any market movement. For every price movement, there is a corresponding reverse trading inflection point - a great time to replenish your wallet. Quick and smart decisions are what day trading is all about, decisions that are designed to minimize your losses and maximize your profits. Of course, no trader can be 100% right all the time, so be prepared to close positions in the event of significant losses. Learn to identify those possible support and resistance levels, re-enter the trade at the right time, establish good targets and set your stops more carefully, and soon you will be a competent cryptocurrency day trader.