The following tips apply not only to crypto trading or cryptocurrency trading – but whenever and wherever you engage in the field of trading. These rules should always apply. It makes no difference how much experience you have in trading because there is nothing that can be done to safeguard a person from the wrath of cryptocurrency price fluctuations. Bitcoin’s (BTC) volatility, which is a common measure of daily changes, is currently 64 percent annualized, according to the most recent data. According to the S&P 500, this statistic is 17 percent, whereas the volatility spec for West Texas Intermediate crude oil is 54 percent.
However, by following five fundamental rules, it is feasible to minimize the psychological impact of an unanticipated 25 percent intraday price fluctuation.
Fortunately, these strategies do not necessitate the use of sophisticated equipment or big sums of money in order to remain effective during periods of extreme volatility.
Trading Tip 1: Plan to refrain from withdrawing money in less than 2 years
Consider the following scenario: you have $5,000 to invest, but there’s a significant chance that you’ll need at least $2,000 of that total within 12 months for vacation, automobile maintenance, or some other duty.
The worst thing you can do is make a 100 percent allocation to cryptocurrency because you can find yourself in the situation of having to sell your investment at the worst possible time, such as at the bottom of a cycle. Even if the proceeds are intended for use in decentralized finance (DeFi) pools, there is always the possibility of impairment losses or attacks that undermine access to the money.
A two-year vesting time should be implemented for any assets committed to cryptocurrency investments.
Trading Tip 2: Always dollar cost average
The fear of missing out (FOMO) can engulf even the most experienced traders, who are compelled to act rapidly in order to develop a position before the market closes. But, when everyone is making 50 percent or higher returns on a consistent basis, and even meme coins are generating stellar returns, how can you sit back and do nothing?
When you utilize the DCA approach, you buy the same dollar amount every week or month, regardless of how the market is performing. For example, buying $200 every Monday afternoon for a year eliminates the worry and pressure that comes from constantly deciding whether or not to add to a trade.
At all costs, avoid purchasing all of the positions in less than three or four weeks or fewer. Keep in mind that the rate of cryptocurrency adoption is still in its infancy.
Trading Tip 3: Don’t use too many indicators when conducting analysis
In technical analysis, there are numerous indicators, such as the moving average, Fibonacci retracement levels, Bollinger Bands, the directional movement index, the Ichimoku Cloud, the parabolic SAR, the relative strength index, and many others. When you realize that each of these indicators has various configurations, the possibilities for tracking these indicators are virtually limitless.
The most successful traders have gained enough expertise to understand that reading the market correctly is more important than selecting the best technical signal. The links between crypto and traditional markets are of particular interest to some, while others are just interested in the crypto price charts. There are no right or wrong answers here, save for the attempt to track five separate indicators at the same time.
Markets are dynamic, and this is especially true in the cryptocurrency space, given how quickly things change.
Trading Tip 4: Learn when to step aside
Eventually, you will make an erroneous reading of the market while looking for bottoms or altcoin seasons. Every trader makes mistakes from time to time, and there is no need to compensate by increasing the bet size immediately in order to recuperate the losses. That is the polar opposite of what one should be doing at any given time.
When you get a “poor break,” take a couple of days off to recover your composure. The psychological toll of losses is great, and it will have a detrimental impact on your ability to think properly in the short term. Even if an obvious chance presents itself, let it pass you by. Aside from trading, take a walk or try to organize your life in some way.
True traders are not necessarily the most gifted, but rather those who have survived the longest.
Trading Tip 5: Continue to invest in winners
As an investor, this may be the most difficult lesson to learn because we have a natural urge to grab profits on our successful positions. As previously noted, the cryptocurrency market is extremely volatile, and aiming for a 30 percent gain will not be enough to make up for whatever losses you have already suffered (or may suffer in the future).
Investors should focus their efforts on buying additional winners rather than selling losers. Of course, one should not ignore market data or broader attitude, but if your expectations remain positive, try increasing the size of your position until the overall market shows some type of weakening.
Being brave and holding on to the most profitable positions will eventually result in a 300 percent or 500 percent gain, depending on the market. These are the gains you should have expected while investing in such a risky market, so don’t be alarmed if they appear unexpectedly.
Trading Tip 6: Every rule is meant to be broken
If there was a roadmap to bitcoin and crypto trading success, many individuals would have discovered it many years ago, and the returns would have been negligible for a long time. You should always be prepared to disobey your own rules once in a while, and you should do it frequently.
Do not blindly follow investing recommendations from influential people or skilled money managers. Individuals differ in their willingness to take risks and their ability to add positions following an unanticipated setback. Make sure to take care of yourself along the road, though, as this is more vital than anything.
The author’s thoughts and opinions are entirely his or her own and do not necessarily reflect those of CoinNewsDaily. Each investing and trading action entails risk; before making a decision, you should conduct your own research.