Here we are, after much procrastination you have finally made the decision to invest in Bitcoin and crypto-currencies. Here are some tips to start avoiding as much as possible to fall into the pitfalls in which all the novices have more or less taken the feet how to store cryptocurrency.
Put all your eggs in one basket: error
You’ve discovered the white paper of a cryptocurrency whose idea fascinates you, so much so that you plan to invest your entire starting bet in it? This is not the best idea in the world. Even if your choice is very promising, nothing says that the market will agree with you. And since it is he who sets the prices … It is not uncommon for a cryptocurrency with enormous potential to live for months (see the price history of Ripple, Stellar, etc.). It may frustrate you. All professional investors will tell you: never put all your eggs in one basket. Whether in classic markets or in cryptocurrency.
Do not fall in love with your investment
The cryptocurrency market has a unique characteristic: some investors swear by a currency, thus developing a potentially dangerous affective attachment. Have you ever seen an investor in stock markets wear a “I love AMZN” T-shirt (for Amazon), or an FX trader drinking in a “JPY rules” cup? No. Yet many investors in cryptocurrencies, when buying one of them, seem to be entering religion. It’s not healthy. Of course, you can have a preference for one or the other. But this should not make you lose sight of the fact that you have invested money in order to make a profit. Do not let your feelings alter your perception of reality.
Do not panic when it’s pitching
As you probably already know, the cryptocurrency market is extremely volatile. On the other hand, being exposed to this volatility when investing money can push the least seasoned investors to panic (and even the most experienced ones, to tell the truth). As a beginner, wanting to undertake “corrective actions” to limit the breakage I think is a mistake: you risk making things worse. It is better than to let the storm pass: the global and abrupt corrections caused by the coughing Bitcoin king are frequent. With time, you will adapt to it.
Always keep some mutinions in reserve
The “FOMO” ( fear of missing out , the fear of missing out ) pushes many investors to always be completely invested in cryptocurrencies, without ever having dollars or euros in reserve. You see the market climbing and your dollars do not benefit … Until the moment we see a severe correction! This is the perfect time to spend on the purchase by taking advantage of the sales.
Buy when it’s calm
Still because of the famous FOMO, the players of the cryptocurrency market tend to jump on any currency that starts to move up, for fear of not taking advantage of a possible jump. It is possible that the motto Machin, which has just exploded by 20% or more, doubles in the next 24 hours … or corrects to return to its initial point, or even lower. To avoid falling victim to the famous “pump & dump”, it is better to adopt the opposite strategy. To know how to switch to buying when you see a currency stabilize after a significant decline. The graph below is very useful in this sense:
Do not focus on the unit price
Many beginners focus solely on the unit price of a crypto-currency without worrying about the number of coins in circulation. To avoid tedious calculations, focus on the market value. It will allow you to better understand the upside potential of a cryptocurrency.
Want to play the day trader immediately: error
Day trading, which consists of buying a cryptocurrency to reap profits in the very short term (over an hour or even a few minutes sometimes), can save you a lot of money, but you can lose as much, especially if you commit the odd suicidal trader on margin without any experience. Unless you have a gift, novices have a vested interest in putting on the “hodler” suit, which is the one that keeps their coins in the long run. Take the time to observe the market, to familiarize yourself with the graphics and price movements. If this is not the panacea, having technical analysis basics is also interesting. You can then start small, and possibly spend more time later on day trading.
Do not take profits: error
All that goes up always comes down at one time or another. In the cryptocurrency market, everything goes very fast, whether up or down. When you have made substantial gains, consider taking profits, even if you reinvest them elsewhere. In this market, the spectacular increases of a popular asset are experiencing equally flamboyant corrections. The difficulty is of course to identify the highest. You will improve with experience. I advise you to study the graphs from November 2017 to January 2018 of Ripple, IOTA and Cardano, which are very instructive to illustrate this.
Not having a strategy defined: error
As an extension of the previous point, before buying a cryptocurrency you must define a plan, whether for a short or long term purchase. What is your price goal, your exit strategy? It can be adapted according to events, of course.
Do not give in to overconfidence based on your results
You started to invest in crypto-currencies say early December, you have already doubled your starting capital what makes you think that you are a trader genius? At the risk of disappointing you, it is wrong: you have simply done as well as the market as a whole, whose value has doubled since. You must understand this: for a little over 2 months, crypto-currencies are in a huge bull market. It is therefore relatively easy to make money unless you multiply the errors listed above. When the market matures, it will be more complicated.