Important Tips and Mistakes to Avoid While Trading Crypto
Cryptocurrency trading refers to the speculation of the movement of cryptocurrency prices through a Contract for Difference (CFD) trading account or may imply the act of buying or selling off cryptocurrencies through an exchange. “CFD trading are derivatives, which enable you to speculate on cryptocurrency price movements without taking ownership of the underlying coins. You can go long (buy) if you think a cryptocurrency will rise in value, or short (sell) if you think it will fall.” A small deposit or margin needs to be put up, which would give complete exposure to the market, as these are leveraged products. This implies that the profit or loss would be calculated based on the size of one’s position as leverage would magnify both.
How to trade cryptocurrencies?
Cryptocurrencies can also be bought or sold at an exchange, and for this, one needs to open an exchange account, put up the value of the asset to open a position, and store the coins in the wallet till they are ready to be sold off. Maintenance of the account can be slightly expensive, and some exchanges have limitations on the amount of deposits. Crypto Exchanges help in learning about the market, especially based on the data, as cryptocurrency markets are decentralized, not run, or governed by any authority. However, owing to the decentralized nature of the cryptocurrency market, it also entails a number of risks that traders must be aware of and these tips will help them to trade their cryptos safely.
Mistakes you can avoid before trading cryptocurrency
- One of the simplest yet commonly ignored mistakes is not being informed about the product and its value and taking an expert opinion on face value. Instead, one should explore the product marketplace in detail before trading in them.
- Another mistake to avoid is putting a large sum of money which one cannot afford to lose as errors can occur even at the hands of professionals or experts. To minimize initial errors or insure oneself against them, one can invest a smaller amount of money without taking huge risks.
- Coins should not be sold at peak values as prices are highly dynamic and can become double or more than what they have increased currently. Selling everything at once is one of the common mistakes as buying or selling should be planned according to a strategy and not just based on money flows in the market.
- Buying cheap coins without sufficient knowledge of the currency should be avoided as it might be a fraud. Many altcoins seem to be cheap and profitable and inexperienced users become prey to such traps and consequently end up losing more than they had invested. Knowledge about the currency is essential before any making any investment.
- Undoubtedly security is the highest concern among the crypto-community and yet many fail to keep this in mind. “Hundreds of millions of dollars were lost because people trusted all their data to a stock exchange that was hacked, or to a service that stopped working.” Technology has made it an easy gamble for hackers to get hold of money, especially when money is free-flowing and controlled by computer software.
- Sometimes traders commit mistakes due to the ‘fear of missing out,’ i.e., they may sell an asset early to gain maximum profits, or out of fear of misplacing a promising ICO or buying a high value in order not to miss out. One should follow a set of rules while trading or selecting a project and set limits of permissible profit or loss.
How to protect cryptocurrency?
Therefore crypto traders need to keep certain points in mind while investing or trading on exchanges– for example, to keep information private and secure. Use of strong passwords for crypto accounts and emails and another related log in credentials, one can also use a password manager like Lastpass. Creation of a separate and new email only for crypto accounts and using that email for that purpose only. One should also use two factors or if possible multi-factor authentication to all accounts, which can also be done using apps like Authy. Strong anti-virus software is essential to keep all accounts secure, along with the distribution of the cryptocurrency across different wallets.
All currencies should not be stored in a single wallet, which makes it more vulnerable, besides traders should be very careful about fake websites and emails which can illegally access all information. This kind of fraud known as ‘phishing’ has become very common nowadays and therefore; investors should let some family members know about the investments they are making, someone trusted, who would possibly inherit the wealth. This keeps access to the account open, yet safe in case some misfortune occurs to the trader, the money is not lost. Crypto-traders should thus be on the lookout for trusted trading platforms like Bitcoin Code Review, find out details to make more profitable and safe investments.