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Want to buy cryptocurrency for the first time? � We have some tips for you!
Probably only a lazy has not heard about the cryptocurrency, and has not thought at least once about buying it.� We have prepared for you a few tips that are good to take note of, if you are really going to buy cryptocurrency. Below we briefly consider on what you should pay attention.
�Choose the way to buy cryptocurrency and verify its reliability�
Despite a lot of options, actually to buy� cryptocurrency bocomes harder and harder. The reason for this is even the most trivial concern of the state that its citizens whenever not in contact with the cryptocurrency. But those who seek, will always find where and how to purchase. Also? you can read about where you can conveniently buy and even sell cryptocurrency HERE.
�Take care of the place to store cryptocurrency�
If you think this is a secondary question, and at the first place should be the purchase of cryptocurrency, then you are mistaken. As banal as it sounds, but it is always necessary first of all to care about where you will store your savings. With this choice of the storage place work should begin with the crypt. Storage options, a huge amount, but first you need to familiarize yourself with the types cryptocurrency wallet.
In the case where you plan to buy a token amount, threat of safety which will not see in nightmares, then wallets designed for smartphones are a great option. The best way to determine the choice of the purse to stop on a variant with a high rating and positive feedback. An important point to pay attention to the ability to move your account on any other device, and you have satisfied the сommission on cryptocurrency refund and withdrawal.
But if you plan to purchase significant amounts, then select on your computer a place for it installation. It is desirable not to be lazy and spend your time to read the instruction of the wallet. We recommend to consider the option of desktop wallets. This type of wallets are the most secure, since it implies downloading the purchased cryptocurrencies to a personal computer user. They will be stored on your hard drive and systematically checked by communicating with the server.
«A little advice: if you don�t plan to trade regularly, then store purchased coins on a cryptocurrency exchanges. They are often subjected to hacker attacks.»
�Never buy cryptocurrency on your last money!�
Many of us would like to get into the list of those who spend his last money and become fabulously wealthy. But always remember, that it is a double-edged sword!� For the beginning, lets back to reality from the world of illusions. It is 2020 today and it is not as much easy to buy bitcoins as it was before. Though, because the price has at times managed to take off, and whether there will be an analogue of bitcoin among altcoins impossible to predict. Of course, that this does not mean that you will not be able to increase their capital, but without guarantees that it will happen quickly. To date, it is unlikely to raise directly, for example, 10000$, by investing just 2000$. This event, recently, is becoming more and more unpredictable.� Don�t be fooled by isolated success stories, happy inflated hype and promotion of the cryptocurrency on the Internet. Each true story conceals a lot of the failures happen frequently due to inexperience and negligence of a person. Ask yourself: is it worth the risk? am I ready to lose money? do I have enough experience? Do not forget that to achieve mind-blowing result, you can only if your mind cold. It is best to gain experience considering the mistakes of others than to be himself an example.
�Don�t let emotions to spend coins instead of you�
There are many cases where inexperienced people spending a lot of money in order to buy the currency under the influence of her own emotions, pulls coins on a completely reckless action. Minor negative fluctuations can lead to the horror of the newcomers. In fear of losing their capital, they are able to drain it from the irrational perception of the situation. And this is not surprising, because the high volatility of the stock market allows for variations in the range of 50% during the day. And imagine that you are seriously invested in a particular currency yesterday, and today it has already become cheaper by 25%, so you lost over night a quarter of the capital. In this case, you can sit five times when you see the price and do something not smart in rash.
Alternatively, simply invest, for example in bitcoins, and wait. However, if you are an experienced player, then the best option to date will assist in the management of private capital in the hands of the professional, which, in turn, for the due remuneration shall bring you stable monthly income. Of course, to find such a manager will be difficult. Here you need to spend a lot of time to make sure he�s not a cheater, that his guarantee of the result is not a bubble and that he really has the experience.
�Do not try to buy cryptocurrency during its rise!�
After hearing that bitcoin once again has broken the record, it is very and very unwise to shake the money out of your pockets and run to buy it. A well known rule � any asset after its sudden growth, is expecting a sharp drop or its next correction. Without the necessary experience and knowledge about what is happening, you hardly have time to earn extra money on the growth of cryptocurrencies, moreover the risk of losing your coins. In this matter, it will be wiser to listen to the professionals, if you do not have your own opinion.
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How to buy and sell cryptocurrency
In our latest guide to Bitcoin , we outlined what is necessary to know about blockchain as the basis for cryptocurrencies. Let�s move on to getting some coins and see how to buy and sell cryptocurrency. There are two things you should be familiar with. One, crypto-exchange platforms and, two, cryptocurrency wallets. Exchanges are the places where you would exchange, buy, sell bitcoins and altcoins. The latter is a tool to store your digital coins. To better understand cryptocurrency transactions, we�ve decided to review two biggest exchange platforms.
Currently the biggest and most popular cryptocurrency exchange platform, available in 32 countries. It allows trading Bitcoin, Bitcoin Cash, Ethereum, and Litecoin. To over 20 million users it offers a friendly interface, few levels of protection and both desktop and mobile ( Google Play and App Store ) versions.
You have options to create a private or a business account. In case of second, the service will offer to redirect you to the subsidiary products � GDAX , a trading platform for investors, and Coinbase Commerce API, for accepting cryptocurrencies as payments for goods and services.
Further registration forms will require personal information like bank account, credit/debit card, address, ID and its verification. The more data you give, the higher your buying options will be. The daily maximum cash transactions for the U.S. is $50,000, for Europe � �30,000. As soon as you create an account, it is time to choose the means of protection. The service persistently advises the 2-factor authentication. 2FA or 2-step verification, besides the passwords, there�s a 2FA code. The code is generated on your phone by such methods like TOTP (time-based one-time password), Google Authenticator or similar apps, SMS/text codes (less secure).
Payments and fees
Coinbase supports three payment methods: banking account, debit/credit card and wire transfer (PayPal). Depending on a country, available options can vary, the same as the conversion fees and exchange rate. Take into account, that in countries like Australia, Canada, Singapore, both variable and fixed fee are used. But in general, for the fastest transactions you will have to pay more:
|Best for||Buy||Sell||Deposit||Withdraw||Speed||Fee (USA)|
|Bank account||Large and small investments||+||+||+||+||4-5 business days||1.49%|
|Debit/Credit card||Small investment||+||�||�||�||Instant||3.99%|
|Wire Transfer||Large investment||�||�||+||+||1-3 business days||3.99% (PayPal)|
Local currency wallet is another useful feature. A consumer can place the funds in USD, Euro or other national currency, and later use it to buy the coins.
As mentioned earlier, Coinbase has an easy-to-use interface, so, learning how to buy and sell cryptocurrency won�t take a lot of time. Currently, the service supports following digital currencies: Bitcoin, Bitcoin Cash, Ethereum and Litecoin. Coinbase provides rates statistics by each coin (hourly, daily, weekly, yearly, all time), so the consumers can easily plan their actions based on given information. Mobile app version gives the opportunity to set alerts � to stay notified about price fluctuations.
On Coinbase you can easily switch between Buy and Sell options. In both cases, the system works the same: you choose a type of coin, a wallet and a payment method. However, due to high rates, rather than buying the whole bitcoins, the most common option is buying/selling by fractions. You need to input the amount of money you are ready to spend, and the system immediately displays the amount of coins you get:
For reverse transaction, a consumer has to write down the number of coins he/she wants to obtain � the money sum column will appear:
To sell, a consumer is choosing from what place to take the coins (BTC, LTC or ETH wallets) and where to send funds (USD Wallet, PayPal, or bank account). The rest of it is the same procedure as with buying � select the amount of coins to sell and/or your rate.
The second biggest cryptocurrency exchange, according to experts and users. Kraken is available in the European Union, Canada, Japan, and the USA. Unlike Coinbase, it works with both trading schemes: cryptocurrency to cryptocurrency, and cryptocurrency to fiat currency. The service supports 17 digital coins such as Bitcoin, Bitcoin Cash, EOS, Gnosis, Tether, Ethereum, Litecoin, etc. Combined with local currency (USD, EUR, GBP, Yen), it creates tradable pairs � XBT/USD, BCH/USD, EOS/EUR, etc. The service also provides statistics of fluctuations and trade rates for each pair.
After signing up, a user has to pass verification. The more advanced account you want, the more requirements it will have:
Tier 0 � the basic level with only interface exploration;
Tier 1 � requires full name, date of birth, country, phone number and has the option to deposit and withdraw only digital currency;
Tier 2 � requires a physical address, and allows depositing, withdrawing and trading in digital and fiat currency;
Tier 3 � requires ID verification, but provides much higher buying/selling limits;
Tier 4 � requires a signed application form, ensures higher daily and monthly limits than Tier 3.
For advanced security, Kraken offers the already known two-factor authentication (2FA) combined with a master key � as the option to recover account access. 2FA is provided by authentication app (6-8 digits one-time passcodes), Yubikey (hardware device) and static password.
Unlike Coinbase, where you can pay directly from your bank account or credit card, on Kraken you have to deposit some funds first. Choose the fiat currency (Euro, USD, etc.) and select one of the deposit methods: bank account or wire transfer (SWIFT, SEPA). For future, use the same instruction to withdraw your funds.
It is free of charge to deposit funds and there are no limits on amounts. This can not be said about the currency movement inside the service and its withdrawal. Fees vary and mainly depend on volume, and also on the popularity of exchange pair. The charge for withdrawals of digital assets vary from ?0.0005 (Bitcoin) to L0.001 (Litecoin) and to ?0.005 (Ether).
Similarly to Coinbase or other cryptocurrency exchanges, Kraken has its daily buying/selling limits. Amounts depend on the user account status (tier). While buying/selling you can switch between two operations, select currency and its amount. Pay attention, that each cryptocurrency has its minimum order quantity. The reverse rate, like on Coinbase, is not available. For better trading, Kraken has also launched Cryptowatch, that provides �real-time cryptocurrency market data, charting and trading services�.
Besides coin trading, there�s the question of funds storage. Cryptocurrency wallets are digital tools, that aren�t quite as wallets in a conventional sense. They contain encrypted passwords (private and public keys) to unlock funds. Even though most of the cryptocurrency exchanges, like Coinbase, Kraken or Bittrex, provide its own wallets, blockchain experts recommend using more than one wallet. This is especially relevant considering the rise in popularity and thus, more security threats.
Most of today�s coins have its official wallets (Bitcoin Core Wallet, Litecoin Core, Ethereum Wallet, etc). Though you can also choose between multi-coins or single-coin wallet. And yet, there is no wallet which can support all currencies. To unify all available cryptocurrency wallets, we�ll get 3 groups: software, hardware and paper wallets.
Software wallets can store the private key on your PC/laptop, mobile app or on web (cloud server). If you are going to be an active buyer/seller, probably, this is the best choice for you. However, consider pros and cons first.
One fine example of such service is Armory wallet, check the demo.
Hardware wallet, or a physical wallet, is the most secure way to store any amount of digital currency. The offline hardware device is easy to connect to the internet, often may have a screen, which is an additional safety feature, used to verify the owner.
- immune to computer viruses
- cannot be hacked
- can store multiple currencies
- doesn�t suit the day-to-day trading
Trezor wallet is just one example.
Paper wallet seems less technical than other variants. But everything isn�t so unambiguous. Special software programs (BitAddress, Bitcoin Paper Wallet) generate the private and public keys and then the information is printed, most often like QR-code.
- full immunity to hacker attacks, malware, viruses
- is not stored on any device
- a piece of paper can be lost/stolen
Check out Bitcoin Paper Wallet Generator if you want to know more about it.
Tips how to buy and sell cryptocurrency
Even though the whole idea of Blockchain is independency, security and decentralization, it does not mean all risks are demolished. Yes, your funds of bitcoins and altcoins are better protected than in typical banking system. But many fraudulent schemes have already entered the blockchain environment.
Thus, tip #1: u se more than one exchange. Lower fees, user-friendly interface, the variety of payment methods, advanced account protection are main factors, you should consider.
#2 is do not rush to exchange coins into the fiat currency and then withdraw to your bank account. More and more stores and companies accept bitcoins and some other altcoins.
#3, as a beginner, trust the market flow. Choose the most popular exchanges, trading platforms and coins. What is good for the majority, will not hurt your interests. Later, with some experience gained, you will be competent enough to make relevant decisions depending on your selling/buying plans.
And finally, #4 � never forget to make a backup of your private/public keys.
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Cryptocurrency Investing Tips
52 Simple Tips that Will Help You Trade Bitcoin (and Other CryptoCurrencies) Without Making Rookie Mistakes
Here are some basic tips and tricks for investing in and trading Bitcoin (and other cryptos). We cover how to avoid fees, what orders to use, and more.
TIP: The tips and tricks below shouldn�t be mistaken for professional investment advice; instead this is basic friendly advice to mull over. If you want professional investment advice, consult a fiduciary. For a shorter list that zeros in on some key points, see: 5 Tips for New Crypto Traders. See also, how to trade and invest in cryptocurrency and our crypto investing / trading starter kit.
To keep it simple, let�s jump right to some Bitcoin investing and trading tips and tricks:
- Use an exchange, not a broker. You�ll save money on fees. For example, buy and sell with GDAX and not Coinbase.
- When you buy/sell via an exchange, try to use limit orders (try not to use market orders). On some exchanges, like GDAX, limit orders have lower fees than market orders. On GDAX, limit orders are free as long as they don�t fill immediately. Meanwhile, market orders result in a .3% fee, which is better than the 1.4% that Coinbase charges but not as good as 0%, especially if you are day trading. If your exchange rewards you for using certain order types, aim to use them.
- You can short crypto, or long crypto. You can go long in crypto, meaning you are betting on crypto going up (for example by buying crypto). Or you can short crypto, meaning you are betting on it going down (for example by short selling crypto). Meanwhile, if you have the skills, you can do both depending on the price action (you can even use short positions as a hedge). With that said, in the US, in many states, there are very few options for shorting crypto. If you are new to crypto, you should consider just going long. If you would go short, you can mimic a 1x short by selling and going to cash!
- Figure out if you want to go for longterm trades or short term trades. Are you going for short term trades with every penny you have to invest, or are you going to go for the long term with some and trading short term with some? Long-term investors will pay a lower tax rate if they can hold for over 12 months, but as a trade-off, they WILL have to sit through corrections (likely seeing their balance go down 50% plus on paper as often as they see it go up). Short-term investors can avoid corrections if they are nimble, but they�ll owe taxes on the profits from each trade they do along the way (see: how taxes work with cryptocurrency to understand how the long term and short term capital gains tax work with cryptocurrency).
- If you are going to aim to be in crypto for the long term, consider building an average position (for example via dollar cost averaging or value averaging). There is no better way to avoid making a poorly timed trade than buying incrementally instead of all at once and thereby buying an asset at its �average� price over time. If you don�t have a really solid grasp of technical indicators and the way the volatile crypto markets work, consider averaging out of positions as well. Averaging isn�t just financially conservative, it is important psychologically. Taking too big of a position at once can be emotionally difficult to deal with (and can thus lead to bad decision making) given the historic volatility of the cryptocurrency market.
- Consider laddering your buys and sells. In others words, instead of buying or selling everything in one chunk, set incremental buy and sell orders to buy when the price goes down and sell when the price goes up. Laddering and averaging will help you to avoid mistiming the complex and volatile cryptocurrency market. Learn about dollar cost averaging and laddering.
- Learn about position sizing and risk management. To the above point, one generally takes a much larger risk with bigger bets. Learn how to make the right size buys and sells to avoid losing too much on a bad play. See: The Basics of Risk Management and Position Sizing in Cryptocurrency.
- Remember Cryptocurrency is a 24/7 Global Market. In other words, the market never sleeps. Since you do, consider automating your investing strategy using limit orders, stops, or even using APIs (via �trading bots�).
- Dad advice: Aim to buy low, sell high; try not to buy high, sell low. Look at the price trend, if we are at the highest point it has been in the past 24 hours (days, weeks, etc), that is inherently riskier than buying at a short term low. It can make sense to buy as the price starts to break out (to �buy into strength�), but buying after a breakout at a new high while filled with excitement is a little �irrationally exuberant.� This is to say, aim to �buy the dips� and often �the best time to buy is when there�s blood in the streets� even if it is your own.� Conversely, the worst time to buy is often (but not always) right after the price has shot up and everyone is manic. If you do buy high, and it ends up dropping shortly after, consider HODLing (to �HODL� is to Hold On for Dear Life as the price goes down). Buying the dips and holding can be dangerous in a bear market, and it can put pressure on you to sell low if you overextend, but it is still often better than FOMO buying the top. Sometimes it can be wise to sell for a loss or to buy when the price is at a local high, but knowing when this is the case requires a rather high skill level. Thus, although rules sometimes are best broken, start by aiming to buy low and sell high. Two last points A. Knowing when to take a loss is hard, buying the dips and holding is easy. B. The dips WILL happen, you must be patient and ward off FOMO! C. If you aren�t willing to see 90%+ losses, then call a point where you will take a loss and stick to the game plan.
- You cannot �buy the dips� if you have all your money to invest already invested. LET US STRESS THIS POINT! The point should be obvious, but it bears repeating over and over. It is tempting to go all-in, but that limits your options. Consider always having some funds to the side to buy an unforeseen downturn. Even if you want to �go all-in� on crypto� leave yourself at least a little money to the side just in case. If you are all-in and the price takes a hard downturn, it takes lots of options off the table. It is hard not to go all-in when a coin goes down 60% � 80% over the course of weeks or months, but sometimes they go down even more than that, and it is wise to always prepare for the worst case.
- Learn the Difference Between a Bear Market and Bull Market. General wisdom says �Buy support in a bull, sell resistance in a bear.� Regardless of what type of investor or trader you are� you should learn to spot the difference between a bear and bull market and shift your tactics appropriately. From 2020 � 2020, during a long bull run, you could essentially buy every Bitcoin dip and come out ahead. In 2020 and 2020 buying dips was mostly rewarded with heavy losses. In 2020 and 2020, two bearish years, shorts could short every resistance and profit. In 2020 � 2020, it was rarely safe to short Bitcoin. Knowing the difference between a bull and a bear can be a big deal in any asset, but with the brutal market cycles of crypto, it is especially important to learn the difference.
- Bitcoin (BTC) is King/Queen; Don�t Get Overly Optimistic About Altcoins. Those who invest in BTC tend to get itchy fingers when BTC stagnates and alts go up. Sure, going into IOTA or ZCash can be a brilliant move at times� at other times you�ll be holding the bag while everyone moves back into BTC. Stick with coins you know and like, but consider always being partly in BTC (not 24/7, but in general). This advise applies somewhat to Ethereum as well, but first and foremost BTC is the center of the crypto economy.
- Learn to value coins in BTC. Ether aside, Bitcoin is the current primary currency of the crypto economy (i.e., its what you have to use to buy most altcoins). Those new to crypto tend to value things in dollars. Meanwhile, even seasoned cash traders value coins in dollars. However, enough crypto traders will value coins in BTC for it to matter. If you aren�t aware of the BTC charts, you won�t be able to properly understand the trends everyone else is analyzing and reacting to. You don�t have to make getting more BTC your goal, but you must have the BTC prices of altcoins on your radar. There are times when all coins move up, but altcoins steadily loose value against Bitcoin. Those who know will be the first to dump altcoins for Bitcoin; this will set off a vicious cycle that can result in the stagnation of altcoin prices.
- Altcoins and Bitcoins tend to react to each other. Sometimes they do the opposite of each other and sometimes they do exactly the same thing. It is not rare to see Bitcoin go down while alts go up (and vice versa). This is because almost everyone who has alts has Bitcoin, so they tend to move out of Bitcoin when it goes down and move into alts (and vice versa). Almost just as often as this is the case it isn�t the case. Many times, all coins will go up or down together (generally following Bitcoin�s lead). This dance often results in Bitcoin outperforming altcoins, however every x months we will see an alt boom where alts outpace Bitcoin quickly. If you can time that, great. Try to spot it coming and there is big money to be made. Meanwhile, alts can be tricky to just HODL, as they tend to lose value against fiat and BTC in the off season. Learn more about the relationship between Bitcoin and Alts. In a word, alts are generally more volatile than Bitcoin.
- Speaking of the last few points, realize that crypto tends to be pattern based and tends to go in cycles. See �the cryptocurrency rotation� and �market cycles� for an in-depth look at what this means. You want to be in a coin before it starts its rotation, and then laddering out as its rotation ends. Likewise, in a perfect world you want to be in for the bull part of a market cycle, and out for the bear part. Near impossible to spot these trends in advance, but with experience you should be able to spot them as they occur and manage your positions accordingly.
- Consider Diversifying. With the above advice in mind, there is nothing worse than getting frustrated with BTC, moving to ETH / alts and missing a BTC price spike, then moving back into BTC and missing the ETH spike. This is very easy to do given the rotation, and the natural urge to �FOMO buy.� If you have some of your funds in all the coins you trade, you�ll avoid missing out on a unicorn (a term one can use to describe an odd event, like a giant price spike in a short amount of time). If you diversify, especially when prices are low across the board, you�ll avoid some of the urge to jump into one coin mid or late into a run and out of a coin just before it goes on its run. In other words, although it isn�t the most profitable tactic, diversifying is good for one�s sanity in a number of important ways.
- Learn Technical Analysis. Technical Analysis (TA) is the analyzing of price and volume data and trying to predict future trends based on that. If you know how to read a chart, you�ll be better able to understand how things like candles, moving averages, RSI, and the order book can clue you into good spots to buy and sell. Crypto defies logic all the time, but basic indicators are still helpful to understand. TIP: You don�t have to be good at TA, you can just follow others who are. Fibonacci support and resistance levels, moving averages (try 12, 26, 9 MACD on 4hr candles), RSI, and a few other popular indicators are vital to wrap your head around. All the pros use these, and all the big players have bots who run strategies based on these (complex versions of these at least). You can�t afford to ignore TA if you are going to trade crypto and not just invest in it. I suggest you get familiar with tradingview.com ASAP. See a basic TA strategy. TIP: Do your own TA, every trader has an opinion, often their opinions are wrong. Many analysts thrive only in bear markets, or only in bull markets, or only on a certain style of trading. Only you know what is right for you!
- Watch the Order Book. The order book (found on all exchanges) can give you a good sense of what buy/sell orders are �on the books� (sitting on the market waiting to be bought or sold). If you see a lot of sell orders at a certain price and want to sell, you may aim to sell under that price. Likewise, if you are waiting for the price to drop to buy, look at the distribution of other people�s buy orders. Just watch out for artificial buy walls and sell walls (large orders that aren�t meant to fill). You�ll almost always find buy walls and sell walls at support and resistance levels.
- Hold some coins, range trade some coins, keep money on hand for a dip, and set some high-ball and low-ball orders. If you want to ensure you are happy no matter which direction the winds blow, then be set-up to benefit from whatever comes next. If you have some coins you hold, some coins you trade daily or weekly, some money set aside for a dip, and some high-ball and low-ball orders set, then you stand to benefit regardless of what happens. It can be tempting to cash out of crypto or go all in, but both of those can be disappointing if the market goes in the opposite direction you were hoping for. It isn�t always the most profitable move to run a strategy like this, but it can help you to gain experience and have something to be excited about in almost any market. TIP: Note that diversifying your strategy and holdings eats into profits, but offers flexibility. It is a trade-off.
- Use small buy-ins, and don�t margin trade or short unless you know your stuff. The smaller your bet is compared to your total investable funds, the less risk you are taking on every bet (one of many insanely important things we are covering here). Putting it all on black is tempting, but then if it comes up red, you have nothing left to invest. Live to fight another day by learning to manage your buy-in size. As a rule of thumb invest 1% or less per buy-in (yes, that small, really; losing 100% of 1% leaves you with 99%, losing 1% of 100% leaves you with 99%. Small bids offer the same bet, but with way less risk). Put reward aside and practice risk management and capital preservation until you are very experienced (and thus, by logical extension: don�t margin trade or short unless you know what you are doing, as those leveraged bets magnify your risk by their very nature). See Kelly criterion.
- Don�t zoom in too much on the price trends of the moment; don�t sweat the small things. It�s easy to zoom in and get stressed when Litecoin goes from $220 to $213 (or something like that). However, these little movements only matter if you are day trading large amounts of coin relative to your total investable funds. Zoom out a bit and look at trends over larger periods of time. Don�t think of that $213 relative only to $220, think of it relative to the $100 Litecoin was at a few months back, the $400 it was at after that, and the $100 it was at just a little while ago. From that perspective, a fluctuation between $220 and $213 is nearly insignificant. I will rarely make trades on timeframes shorter than 2hr candles, and I generally am looking at 6 hr and 1 day candles, because I value my sanity and am focused on the long term trajectory of crypto. That only changes in very specific instances and with purpose. If you zoom in too much, you lose sight of overarching trends (many of which are actually stronger indicators of what is actually happening).
- In stocks, it makes sense to sell losers, but that isn�t always true in crypto. In stock trading, if a company is not doing well, it can be smarter to sell their stock and buy a stock that is doing well. In crypto, big changes can happen quickly. A bearish coin can make a turnaround at any support level or based on some good news or rumors and make 100% gains in a matter of hours. If you aren�t trading frequently and aren�t at a computer 24/7, it can be a solid move to slowly build a position in a coin that isn�t doing well, but that you think is a good long-term bet. The only exception to this rule is this, if you understand TA, it is generally wise to ladder out when all the short term averages have fully crossed under the long term and in when they have crossed over. Your goal is still the same, to build a position low and hold until highs, you are just practicing some risk management in between. This added measure helps protect you from long bear markets. In other words, only sell losers if you have a logical reason and trust yourself to buy back in. If not, focus on building average positions (but plan for the worst before it gets better). Bottomline on this: Stocks move much slower than cryptos. So a loser sold now and shifted to a winner can mean months upon months of rewards. Cryptos tend to move fast and go into bear and bull mode in groups and go on runs at the blink of an eye. Sell a loser today and shift it to a winner, and trends could be changing by the time you wake up. It isn�t that you should never sell the losers and buy the winners, it is that it is trickier in crypto than it is in stocks and the same logic doesn�t apply exactly.
- Accept that coins can go to zero, and even good coins can lose up to 80%+ of their value (especially against BTC). There are many coins that didn�t make it to 2020 that were once highly valued and popular. Meanwhile, even some giants of today like ETH and XRP have seen their value in BTC prices drop to depressing levels. You should prepare for this mentally and have a strategy that factors this in. If you buy the dip in ETH from .15 down, .08 may look like an excellent price, but you have to be ready for .02. ETH holders who didn�t prepare for this had a depressing June 2020 � December 2020. Heed my warning, that new coin doesn�t have to moon twice, it can go to literal zero, and even those that will moon again� they can have long seasons of stagnation in between (where they lose value against BTC for months on end). See the Crypto Graveyard and please look at the historic charts of major alts like XRP (the gap between moons is real and some coins really don�t make it).
- React to �the Mood of the Market,� But Otherwise Pick a Strategy and Stick With It. The market changes moods, and some strategies are better than others in a given market. So you�ll likely want to evolve your strategy as the market changes, and you learn. However, you�ll also likely want to avoid things like going long for most of the year, but then 9 months into your investment you start day trading when the market is down. Sometimes it can be tempting to change one�s strategy to adjust to the current market (for example if the market is bearish and trading in a tight range), however, this can get you in real trouble if you don�t make very careful moves. A long investor who starts going short will start realizing capital gains and will risk being in fiat if and when there is a recovery (recoveries, like corrections, can come on very quickly and without warning). If you do switch from long to short, make a commitment to yourself to buy back in upon a certain event occurring (like the 5 day EMA crossing the 50 day on 6 hr candles; something like that). I�ve hear countless stories of plans to buy back in, they often end with �but I didn�t,� those are the stories told in bull markets by very sad people.
- To stress some points made above, realize that a diverse portfolio and investment strategy will eat into gains as often as it staves off losses. The only way to make big profits most of the time is to make risky moves. If you go all in on a single coin at a given price and it goes up, that is a payday. If it goes down, your investable funds are locked into that crypto (unless you want to sell at a loss). Diverse strategies protect against this, but they will also eat into your potential gains (as it is rare for everything to go up or down at once). Know what you are looking for and know how to weight your portfolio to reflect that.
- Don�t get itchy fingers (AKA be wary of FOMO buying and panic selling). As noted above, if you have a strategy, stick with it. Sometimes the market will go nuts, and you�ll see epic gains, and you�ll get FOMO (all humans get FOMO, it takes discipline not to react to it). Other times the market will dump hard and that could open you up to the pressure to sell in a panic. Selling or buying at times like those may make sense, but don�t get nervous and switch up your whole strategy without thinking about it. Those emotional times is often when bad moves are made. If you are going to buy heavily or sell heavily on a whim, consider taking a step back first.
- Watch out for scams. There are a few different scams in the crypto world. Anything that isn�t buying a coin with a good reputation is a big risk. Learn more about scams. In short, be super careful about anything that promises free coins, sick returns, or wants you to lend your coins. Buy the top coins using a careful strategy and ignore all the sites promising you they can outperform the market if only you give them X, Y, and Z.
- Don�t go downloading random wallets or clicking on random links, but do accept that you have to share information with exchanges. There is some malware out there, and you need to do research and be careful. However, for all you want to protect your privacy, you have to share your info with exchanges you want to use. So share what you have to and download apps as needed, but be careful and do research.
- Ignore the noise, do your research, and listen to pros. People on social media will constantly try to sell you magic beans and try to scare you into selling your favorite coin. You should ignore them and do your research. Listening to other people who aren�t seasoned pros is probably the worst way to invest. You are better off flipping a coin. Meanwhile, even the pros get it wrong. You�ll always find someone caller lower lows at the bottom and higher highs at the top. You are responsible for your own trades and investments!
- Don�t share your private keys or passwords. You have to share your public address to receive coins, but never share your private keys or passwords with anyone. If you can avoid being online when you enter your private keys and passwords, that is even better.
- Double check you are using the right link. Some scam sites will use a similar domain or a very close Twitter address to run phishing scams. Double check everything.
- Lots of traders use bots (you might want to as well if you have the chops). To the next point, lots of traders use trading bots. Some are white hat; some will try to get you to make bad trades. Keep an eye out for bots. If you are using a bot, be careful, there are bots designed to exploit poorly programmed bots. In general, if you don�t have a solid grasp of TA and crypto trading, skip the bot. They are only as useful as the strategies they run.
- Watch out for Spoofers and market manipulation. Welcome to the wild west, the sheriff is out-of-town, enter the saloon at your own risk. Spoofing caused the flash crash of 2020 in the regulated stock market, and that happens times 10 in crypto. A too-good-to-be-true price spike or dip is often the work of either market manipulators, bots, or both. Know what to avoid and what to look for by reading our article on cryptocurrency and spoofing.
- Dad Advice: Don�t invest more than you can afford to lose. No really, there will be many great investments in your lifetime, there has been in Bitcoins lifetime. Bitcoin doesn�t cost $225 anymore. The chances that you�ll never have to work again if you invest your life savings in Bitcoin aren�t non-existent, but they aren�t as good as they used to be. If Bitcoin ends up down, you�ll be hodling the bag while others are on to better and brighter pastures.
- Take profits. Some investors think �taking profits� is a dirty phrase, but it is a rather conservative strategy none-the-less. Taking profits can result in you making less money than you would have if you did nothing and just �let it ride�� but that is only true if Bitcoin goes up over the long term. If you have hefty profits, consider taking them off the table, and then waiting for a lower price in the future. Worst case, you can buy back in at a higher price later (leaving some potential profits on the table). TIP: If a coin just went up 400%� consider taking some profits. Cryptocurrency almost always corrects at some point after a big run. I personally would say HODLing after making 400% gains is called GREED. I won�t ever sell my full stack in one chunk, but I�m going to start averaging out when the MACD turns bearish after a 400% � 1,000% run if the run was somewhat organic. If the run was the result of a pump and dump, then I will likely take it all off the table quickly. Pump and dumps are frustrating events, like I said, watch out for manipulation.
- Expect Price Spikes, Expect Corrections, Be Patient, and Stick to a Strategy: Cryptocurrency tends to make big moves in its price and volume. It is easy to get FOMO (fear of missing out) and buy high, and it is easy to get overwhelmed by FUD (fear, uncertainty, and doubt) and sell. If you miss a price jump, it isn�t necessarily time to go all-in in an emotionally charged panic. Instead wait patiently for the price to settle (which could take weeks or months) or average in or out slowly. Taking gains after the price goes way up, or making a buy after the price goes way down makes sense. Panic buying after the price just went way up, or panic selling after it went way down is rarely the right move.
- Set limit orders for a few dollars under or over recent lows and highs. This can result in you buying or selling before BTC hits resistance. Sure, you can use crazy TA skills to find support and resistance levels, but you can also eye out levels by looking at a chart. 9 times out of 10 you�ll be able to eyeball a general support or resistance level and get close to the level a pro would have charted out (partly because the price has likely stalled on / bounced off those levels before; little parlor trick).
- Bitcoin tends to find resistance at whole number points. For example, at $4.8k and $4.85k. It also absolutely loves to react at whole numbers like $10k and either drop or run. If you know you want to take profits soon or buy soon, keep an eye on those whole numbers. If you feel like the run must almost be over, pull your profits before the whole number is reached!
- Consider setting stop orders after you buy. Did I really just wait to point #37 to commit a whole tip to stops?! They are super important for everything except maybe building a long position over time. A stop order will create a market order when a price is hit. This means stop orders are subject to slippage and fees, but this also means you can calculate your risk. As a very general rule of thumb, one might want to ladder stops when not at a computer to protect their investment. Sure, crypto markets are thin (low volume), and that means prices could dip and eat all your stops (super depressing when this happens). However, most of the time we don�t get very deep and temporary dips, and thus most of the time stops will work as intended and simply save your investment in the case of a downturn. I.e., use stops, but be careful and understand the risks.
- Watch the news. Did Russia and China just come out against exchanges? Is Bitcoin about to fork? Is FUD in the air? If so, the market could very well react to that.
- When Bitcoin forks into a new cryptocurrency� everyone gets free coins. When Bitcoin Cash was created, everyone holding BTC got 1 Cash for every BTC they had. Next time Bitcoin forks this will be true again. NOTE: Forks can be confusing; if you aren�t in the fork for the capture date (which isn�t always clear) you don�t get the free coins. DO NOT CHASE FREE COINS (see next point).
- Forks are nice, but they aren�t worth losing money over. 1 Bitcoin Cash is worth about $330 as of today in Oct 2020. 1 Bitcoin costs about $4.8k. If it cost you hundreds in losses to get a single Bitcoin Cash, it probably wasn�t worth it. In other words, don�t let excitement or fear of a fork mess with your general strategy too much. The best example of the worst that can happen with a fork is Zclassic. This event was really sad. Let is serve as a reminder of how brutal crypto can be and why chasing a fork sometimes just ins�t worth it.
- Join some social media groups that discuss Crypto, but take what they say with a grain of salt. It is good to get a sense of what is going on.
- Realize that Bitcoin could get supplanted by another altcoin over time. For now, Bitcoin is both king and queen. This won�t necessarily be true in the future. Yahoo used to be the search giant; now it is Google. You can be right about crypto, but wrong about coin choice.
- If you are a big player, keep in mind you can distort the price (thus, you might actually want to margin trade� or like, spot trade and help us lift the market ?? ). Volume is decent on any given crypto exchange, but this isn�t like trading the S&P. If you are playing with 50BTC, and you try to buy or sell that much at once, you can distort the market temporarily. When you watch buy and sell orders in an exchange, you�ll notice that when sells ball up the price tends to drop and when buys ball up the price tends to go up. If you try to buy or sell too hard, you can drag the price up or down a little. If you have insanely deep pockets, you can accidentally be dipping your toes in at-best-grey-area behavior. It is much better etiquette to buy and sell in amounts that are average for the book you are buying on. When a high-level investor buys ten billion worth of a stock or sells, they do it in chunks (to avoid dropping or spiking the price of the asset). TIP: Also watch out for shady people pumping or dumping a coin by doing this. What looks like a lot of buyers could be one person or a group messing with the price. The lack of regulation is a blessing and a curse with crypto, as is the relatively low volume compared to other asset types.
- Learn the lingo. BTC is the symbol for Bitcoin. Bitcoin is a type of cryptocurrency. An altcoin is a coin that isn�t Bitcoin (like Ether). Limits, stops, exchanges, shorting, forks, ICOs, margin trading, etc (search for any of those on our site). It is way easier to invest and trade if you understand the common terms used. It is also easier to make friends in crypto groups if you know investing lingo and basic memes like �hodl.�
- Know when to take a loss. Nothing is less fun than taking a loss, but if you are going short in BTC and you haven�t set a stop, sometimes it makes more sense to take a loss and wait for a better price than it does to suddenly start going long. The best way to know when to hold �em and or fold �em is some basic TA on longer term charts (I will use things like MACD on 6hr � 12hr � 1 day candles to confirm trends) paired with unwavering discipline.
- Know what you are investing in, and know the risk. Bitcoin is speculative and volatile. Buying near $Xk means buying near the highest price Bitcoin has ever been. Some think Bitcoin is going to $X2k; some think it is going to $10. It is easy to get euphoric and think whatever today�s price is a safe bet. Historically that has been true or not depending on the weather on a given day.
- Realize that Bitcoin isn�t the same as Blockchain. Blockchain technology is something many are bullish on, but that sentiment shouldn�t be confused with being sentiment about Bitcoin specifically. Blockchain is not Bitcoin, a company that calls itself blockchain is not the same as the technology blockchain. The new �blockchain killer� might not be.
- Fiat Currency is still a thing; BTC isn�t legal tender; we don�t live in a Libertarian utopia; Governments and Banks aren�t as into Bitcoin as you. If you get caught up in the Bitcoin craze, it can easy to forget that the world�s governments aren�t super stoked on Bitcoin. Libertarians, Tech Geeks, Gangsters, these people are bullish on Bitcoin; world governments and banks, not so much. Last I checked, world governments had a little more power. Betting against them is a risky bet. As we move into the future states have started embracing Bitcoin and crypto, but there is no plan for a state-less state built upon digital currency. Digital currency is at best a supplemental asset class. Be realistic about the potential future here, it is bright, but it is likely not to look like your specific flavor of utopia.
- Know thy taxes. Speaking of legal tender like the USD, it is what you use to pay taxes. If you don�t understand Bitcoin�s tax implications, brush up on them before you start power trading. One could get them into a situation where they make money on paper, but end the year down in Bitcoin without taking their loss, and thus end up owing a bunch of money they don�t have in taxes. Those who don�t have investment experience can get in trouble if they don�t understand the somewhat complex implications of trading crypto.
- Watch out for odd Altcoins and ICOs. The market is tricky enough with the major coins, it is even trickier with odd alt coins and ICOs. Yes, sometimes you can buy these low and see insane gains. In fact, getting it right is the best bet in crypto. The problem is, almost all the odd coins down the list and ICOs will spend the majority of their life being near worthless. Then, you may see a short time span in which these coins preform well. You would think that you would be able to take profits then, but so many people do not. After that one event these can end up in the graveyard. Yeah, you could make it big on low cost alts and ICOs� but I�ve seen more than a few people lose money. Be careful bottom fishing, Bitcoin might not make you rich, but it is a way less risky bet than coins further down the list.
In other words, buy low and sell high via an exchange using limit orders, dollar cost average, set stops if you aren�t in front of a computer, ladder buy and sell orders, use TA, manage risk, preserve capital, watch out for scams, know the tax implications, and consider being conservative in general and not spending your life savings on digital assets.
“Cryptocurrency Investing Tips” contains information about the following Cryptocurrencies:
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