Trading cryptocurrency online can be just as fun and exciting as day trading, but there are a few essential tips you need to consider before dipping your toes in the crypto trading pool. Online trading of cryptocurrencies typically moves much faster than stocks, can be more volatile, and is available 24 hours a day rather than a set time period.
Know Your Starting and Stopping Points
This is a piece of advice that day traders will be very familiar with, but this applies to digital asset exchanges doubly so. It’s easy to get caught up in the potential to make highly profitable trades, only to get too greedy and end up grabbing the knife as it falls. Avoid this mistake by knowing the price you’ll enter the market and the price you’ll exit the market before it ever reaches that point. Be happy with any gains you make and start setting up your next trade instead of trying to ride the lightning. Cryptocurrency trading is already volatile enough without the extra volatility of allowing your emotions to get in the way of common sense.
Altcoins Closely Follow the Value of Bitcoin
When it comes to trading cryptocurrencies, think of bitcoin as the gold-standard among coins. Silver often rises and falls along with the price of gold and altcoins are no different with bitcoin as the gold-standard. Even if you’re not trading bitcoin, you need to be aware of its market movements because it directly impacts any altcoins you may be trading. When there is a high spike in volatility for bitcoin, you can bet you’ll see the same in the altcoin of your choice. Being aware of these spikes can help you set up tighter trades to avoid that volatility when trading altcoins. Online trading is the only method of cryptocurrency asset exchange, so do yourself a favor and follow the bitcoin price whether you intend to trade BTC or not.
Understand that Altcoins are a Flash in the Pan
It’s tempting to get into small-cap altcoins to trade on their high volatility, but most of them bleed their value slowly. Cryptocurrency with a high daily trade volume tends to have its own market, while still influenced by the daily market flow of bitcoin. Ethereum, Monero, and DASH are all coins that have an ebb and flow to them, rather than being bottomless pits like Dogecoin. Before investing in any altcoin, study the charts to see how it performs in both bullish and bearish markets. This due diligence will help you make more informed choices once you dip your hand into the altcoin market.
Never Forget to Factor the Cost of Your Exchange’s Fees
Making money through cryptocurrency trading often comes with being okay at trading at tight margins. Because of this, you should always be factoring the cost of your fees into every single trade you make. Some exchanges divide their fees up according to a maker and taker strategy. Takers are orders that are fulfilled immediately at the current price, while makers are limit buy and sell orders that are filled at a pre-specified price. You can cut down on fees by trading with limit buy and sell orders, but this limits your ability to capitalize on upward market trends. As part of your cryptocurrency trading strategy, try setting up 75% of your orders as limit buy or sell orders, while the other 25% will be reserved for taker orders to capitalize on those green candlestick runs.
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