Trading cryptocurrency might initially seem daunting. There is a lot to learn, a lot to follow, and a lot you need to understand before you even dip your toe into the crypto waters. It can sometimes seem like too much for the average person.
The good news is, there are things you can do, steps you can take, and habits you can create to transform yourself from someone who is intimidated by cryptocurrency into a real crypto trader. These habits are foundational for crypto traders and, if you’re going to trade in this market, they are things you must do in some way to find success.
These habits will help you understand investing in the market better, give you a better chance of success, and help keep you and your investments protected. Here are five good habits you’ll want to create if you’re going to trade cryptocurrency.
1. Understand Your Goals and Limits
Cryptocurrency is an inherently risky investment. The market is incredibly volatile and it is prone to fast, wild swings. This isn’t necessarily a bad thing. While these swings can hurt investors at times, they can also pay off big time for investors who are able to ride the wave correctly.
The key to weathering the volatile market in crypto is to understand your goals and your limits. You need to understand your overall risk tolerance before you ever start trading and, once you are invested, you should have firm profit and loss targets to make sure you don’t overextend yourself financially or get greedy and lose your profits.
Setting loss limits in crypto trading is a must. Prices can drop fast and go on extended downward runs. To avoid losing your whole investment and more, you should adhere to the old gambling adage: never bet more than you can afford to lose.
On the flip side, setting profit goals is important too. Once you hit a certain profit level, yes, there is a chance you can make even more. But there is also a chance you can get wiped out quickly. Successful crypto investors take their profits out once they hit their goal.
2. Use the Right Tools
When you trade crypto, there are plenty of tools to help you along the way. Some are just very helpful while others are essential. Getting into the habit of using all the best tools at your disposal when trading crypto will help increase your chances of finding success.
The tools you need start with the right crypto wallet before you even begin trading. You need this to store your crypto safely. Tax management software will help you settle up with the government at the end of the year without running into any problems. Other important tools include resources like real-time news aggregators, charting and technical analysis tools, blockchain explorers, and more.
While there are currently fewer tools in each category to consider than in more established markets like the stock market, there will be a few decisions you have to make in each category. There will be several products to consider in each category of crypto tool, and you will have to pick the best option for your specific needs. For more detail on some of the different types of essential cryptocurrency tools, consider this in-depth look from Cove Markets.
3. Follow the News
Crypto exchanges are all over the world trading thousands of different cryptocurrencies. The crypto market is a 24/7 operation. The best crypto traders are aware of what is going on in the market all the time. They know what prices are dropping, which ones are rising, and when they can get their hands on the newest crypto IPO.
The best habit you can create to stay abreast of all the important news in the crypto world is to follow the market carefully. Even before you start trading, you should familiarize yourself with the exchanges and the different types of cryptocurrencies, and watch how the market moves.
There are several crypto industry news aggregators out there that can help you follow the market in general and your favorite coins, helping you stay up to date and educated on the market fluctuations. In the world of crypto, an informed trader is more likely to be a successful trader.
4. Make Security a Priority
One of the most appealing aspects of cryptocurrency is how secure it is. The cryptography and blockchain technology that forms the base of crypto makes it nearly impossible to hack, counterfeit, or double spend. That can lull some crypto investors into a false sense of security though. Just because the currency itself is incredibly secure doesn’t mean that it is impossible to steal.
Crypto can be vulnerable while being stored in crypto wallets, and there have been multiple hacks and attempted hacks on exchanges through the years, including some major ones where the criminals got away with an extraordinary amount of crypto. Getting into good security habits while trading crypto is important.
Make sure you choose the crypto wallet that gives you the level of access to your coins you need with the most security. You want to practice good internet security habits and use two-factor authentication on your accounts whenever possible. Also, practice good physical security with any devices that have crypto or crypto-related accounts on them–this is an important part of security, too.
5. Being a continuous learner
In the grand scheme of things, cryptocurrency is an incredibly new world. The currency itself is still in its infancy as are the mechanisms and tools around trading it. To be a successful trader, you need to adopt the mindset that there is, and always will be, more to learn.
The market itself moves fast and so does the entire sector. Constantly educating yourself on every aspect of crypto will serve you well on your journey to becoming a successful trader. If you become a continuous learner and keep accumulating knowledge, your chance for long-term success should be much greater.
No one can give you the magic bullet that will make you a crypto millionaire or tell you the secrets to success in crypto trading. The key to being a good crypto trader is simply developing habits that will help you in your trading process. If you understand your goals and limits, use the right tool, follow the news, make security a priority, and continue to educate yourself, you will have a better (not guaranteed) chance at becoming a successful trader.