You might have seen many articles on tips for beginner traders. But what about professionals? Don’t they need any recommendations? For sure, they do. There is a wide range of tips that suit both newbies and experienced traders, and we’re going to share them with you.
Some Tips for Cryptocurrency Traders
First, we want to highlight recommendations that are more relevant for cryptocurrency traders though they can be used by other traders as well.
#1 Be Realistic
It doesn’t matter if you are a beginner or an experienced trader – you should learn to evaluate your opportunities.
First, you should understand that not each trade will be 100% profitable. There are many cases when traders just partially succeed on their trades – for instance, 50-60%. But it doesn’t mean the trade fails. In fact, your earnings from such profits can exceed the losses on failing trades.
Second, you shouldn’t place unreasonable targets. This mostly relates to cryptocurrency traders. When Bitcoin skyrockets, some traders run to the market, expecting it to reach unrealistic levels. It would be best if you kept your temper in these situations. The market can’t always rise, and a correction might eventually happen. Thus, you should assess the volume of your funds and current market conditions to set achievable targets.
#2 Don’t Trade With Emotions
The cryptocurrency market is one of the most volatile markets. Thus, it’s essential to stay cold and never overreact when the price fluctuates. If you are not ready for high volatility and don’t know how to behave, avoid trading highly volatile and expensive coins.
A reliable trading platform will relieve you of extra worries you can have during crypto trading. For example, Redot, run by industry veterans, provides a high grade of security.
#3 Have a Plan
As mentioned, high volatility in the crypto market can cause panic, especially if you’re clueless about what to do next. You should have a strategy or a plan for every trade. If you analyze market conditions and are sure the price will rise/fall, don’t change your mind for open trades, and don’t replace Stop Loss and Take Profit orders unless it’s a winning trade.
Tips for All Types of Traders
Below you will find recommendations that will help you in trading even if you just started trading or you are a pro in the market.
Diversification is one of the options to lower risks. When diversifying, you choose assets that move in a different direction in the same market circumstances. Thus, if one of the trades fails, another one succeeds. So, although you will lose some money for one position, you will be able to return it with another one.
However, if you are a beginner trader, you shouldn’t choose too many assets for diversification during one trading session. It is complicated to track and find opportunities with many securities – just 2-3 assets are enough. As you gain experience, you can gradually increase their number.
#2 Time Management
Before you start trading, you should fully understand how much time you can set aside to stay in front of a monitor and catch as many opportunities as possible.
If you have a full-time job and can spend only a few hours trading, then the long-term investment is for you. You should consider high timeframes such as daily, weekly, and even monthly. If you work part-time or even ready to consider trading your main activity, you can afford day trading. It takes most of your day but allows you to open more trades as you will constantly monitor the market conditions. For this, you should choose low timeframes, such as 5-, 15-, 30-minute ones.
#3 Money Management
You should always be aware of how much money you have and how much you can risk. There is no trader who never lost their trades. However, how they recovered matters. You should never put all your funds in one trade and never risk all your money. Trading is speculation, so the risks will always follow.
#4 Don’t Revenge the Market
When newbies try to revenge the market because of overreaction and the lack of experience, professionals can be too confident to decide they are experienced enough to change the price direction. In both cases, the chance the market will turn in their favor is low.
Of course, there are situations when the market corrects, moving in the opposite direction, and then turns around. To avoid doubts in such situations, you should place Stop Loss orders wisely. Stop Loss should reflect the risk you can afford.
The best risk/reward ratio is 1:2 or 1:3. It means that your profit should be at least two or three times bigger than the amount you can lose.
#5 Use Limit Orders
There are two main types of orders – market and limit. A market order executes the trade at the time of placement at the current price. So, the execution is guaranteed, but the price may differ from what you would like to have. A limit order works only if the price reaches a certain level you define ahead. Thus, this type of order guarantees the trade will be set at the rate you have chosen, but the execution isn’t guaranteed. Limit orders are used to hedge positions.
Another option is OCO or One-Cancels-the-Other Order. It’s a pair of conditional orders. If one order is triggered, another one is automatically canceled. The most common case is when stop and limit orders are combined.
And the most vital tip is to keep learning. If you learn from past trades and master new tools, you increase your chances of success. Also, newbies can always try out new strategies with paper money and with no risk.