Our support team get a lot of messages asking for „fail proof” trading techniques. We would be the happiest people on Earth if we could tell them the perfect strategy, but unfortunately there is no such thing in trading. Trading is about taking either a low or a high risk in the interest of earning some profit (hopefully a lot). Since the crypto market is pretty volatile, you need to be fine with the thought that your money is at risk.
As we mentioned there is no such thing as “fail proof” trading method, but there are different ways to lower the chance of losing your invested money. In this article we would like to share with you 5 tips, which you can apply on your trading strategy to avoid failure.
1. Have a plan
Before you start investing, you need to know your ‘Why?’. Are you saving money for a new car? Do you want to buy a house? Or you just want to make some extra cash? Whatever your goal is, you need to have a complete plan how you going to reach it. Many people make that mistake, that they are holding to their coins even when those are at their highest point, then they suddenly fall back and your money is gone. If you have a vision how much money do you want to make with cryptocurrencies, just set a target and if you reach that, sell your crypto no matter what. Don’t be greedy.
2. Invest in yourself before investing money
What do we mean by this? That means before you start to invest into cryptocurrencies – or into anything – you need to do research about the coin you are about the invest. Read through their whitepaper, what do they stand for? What problem is that coin is trying to solve? Do you think it is a rational idea? Do you even know what blockchain technology is, and how it works? There is plenty of questions you can ask from yourself before you invest your money.
Warren Buffet once said that: “Risk comes from not knowing what you are doing.” So, before you invest into a coin, always do a deep research about it, this way you can reduce the chance of losing your money.
3. Don’t put all your savings at risk
Rule number one in investing: Do not invest more than you can afford to lose. This should be the main rule you follow throughout your investing career. When you are investing, you need think about that money like if you have already lost it. Many people make that mistake that they invest their whole life-savings or we even heard about people who took mortgage on their house just to be able to buy some Bitcoin. This is a very reckless and irresponsible act. Save 10-20% of your salary each month and put that into your investment account. If you are a beginner in investor, it is almost 100% sure that you are going to make mistakes and lose money at the beginning. Be aware of that before you invest more money than you can afford to lose.
4. Don’t let your emotions make your decisions
Emotions can affect your decisions very easily. One of the hardest thing in investing, is to separate your rational thoughts and your emotions. Don’t let your emotions stand between you and your goals. You need to know that the cryptocurrency market is made of cycles. Prices rise and then fall drastically. When you see the coin you invested in, dropping its value do not it sell it immediately. Cryptocurrencies can be extremely profitable if you follow the HODL strategy, which means that you are holding your investment for a long time.
On the two pictures below, you can see how Bitcoin prices changed on the long-term and how they changed on the short-term.
You can see that if you invested a couple hundred dollar into 1 BTC around 2013 and waited 4 years, you were able to walk away with 20.000$. The lucky ones invested much more than just a couple hundred, but remember higher the risk comes with higher profit. When you look at the other graph, it shows that if you have invested in BTC in November of 2014, you were just losing money for the next couple months. Seeing that your investment is just making loss each month could freak out a lot of people but you need to have discipline and wait.
5. Fear of missing out
FOMO (Fear of missing out) is very common feeling among investors and traders. FOMO is when you feel that something is probably going to be very profitable and you do not want to miss out that opportunity. This leads people to buy very dubious ICO’s or buy cryptos when their prices and very high. When BTC hit 19.000$ in 2017 many people bought on that price because they thought its value was going to increase even more. They were wrong and they lost a lot of money. Remember that you should always buy low and sell high! When a coin is close to it’s all time high you should wait until the price goes down. It is very difficult to fight FOMO but it is possible, you just need to be emotionally strong.
Don’t forget that crypto trading is not a get rich quick scheme. It is a high risk, potential high profit market. Make sure that you are sure it is for you and if you do invest take your time and don’t get too greedy. If you are looking for a great trading platform for beginners, The PEAK is a great choice!