Brought to you by the Liquid team to help you make sense of crypto.
Cryptocurrency is a wild and wonderful place.
Riding Bitcoin is like a rollercoaster, with lots of ups and downs, some of which will probably catch you by surprise.
Whether you’re a trader or an investor, you will always be looking for the best ways to maximize your profits in this complex market.
We’ve got 10 tips here that could help you on your journey.
Manage your risk
Time and time again you will hear that most traders lose money - but that doesn’t have to be you.
Only trade a small percentage of your overall trading capital and use stops to ensure that if the trade goes the wrong way, your losses are minimized.
Risk management is what makes a profitable trader out of a losing trader.
The same can be said for investors – don’t take on too much risk. This can apply to entry prices, when you sell, and what projects you invest in.
Stay safe out there
Cryptocurrency is a relatively new entity.
Rapid development inevitably introduces flaws. Unfortunately there are malicious individuals out there who make it their job to exploit these flaws for their own gain.
Make sure you are using an exchange you can trust, and that any funds you are storing yourself are stored correctly. We recommend using a form of cold storage for maximum fund protection.
Don’t send anyone your private credentials.
Do your own research.
Use 2FA and bulletproof your accounts with strong passwords.
Carry out fundamental analysis
Analyzing the fundamentals of an asset that you are planning to trade or invest in can only help you maximize profits.
A fundamental is every part of an asset that gives it value, so in cryptocurrency we are talking about the team, use cases, demand, regulations, target market, among many others.
If you play your cards right, fundamental analysis can help predict the future price of an asset.
The value of an asset is whatever the market thinks the value is, and this comes from the fundamentals of the asset.
Carry out fundamental analysis to weed out weak projects and spot hidden gems with a potential for large returns.
Utilize technical analysis
Technical analysis is the study of price action using statistics and patterns to attempt to discern key price levels, trends and price trajectory.
There are many technical analysis skeptics out there, but there is a reason top traders use it.
As an investor, technical analysis can help you enter the market at a desirable time.
For traders, technical analysis is highly useful for executing profitable trades.
You don’t have to get bogged down in the complexities right from the start, you can ease yourself into technical analysis by beginning to learn about simple patterns and indicators.
Dollar cost average
The easy way to enter a market: dollar cost averaging.
Just take a quick look at a Bitcoin price chart. What do you see?
Up, up, down, down, repeat – highly volatile prices.
If you enter a market using dollar cost averaging, you are much more likely to get a good entry price, since the effects of volatility are largely reduced.
Here’s how it works: Set aside the amount you’d like to invest and then put in a consistent percentage of this once every X amount of days until you have the position you’re after.
It’s up to you to decide how many days X should represent.
For example, you could set aside 1,000 USD to invest in Bitcoin and then over a period of 10 weeks invest 100 USD every Monday.
Don’t give in to FOMO
FOMO: Fear Of Missing Out.
It’s a feeling that you can’t ignore, but don’t give in.
When the markets are shooting up, FOMO is strong. You will feel like you want to buy in, but you have to stay disciplined. Chasing pumps is a great way to lose money. Don’t buy in just because the prices have skyrocketed. After big upward movement prices often majorly correct, which could lose you money.
Stick to your usual investment principles. Buy with a cool head and a clear mind.
Do your own research
Crypto influencers are everywhere – and they can be a very useful resource.
Influencers often have unique market insights and can help you find projects that you otherwise wouldn’t know about
However, make sure you do your own research for any project that you are thinking about buying.
Don’t take the word of others as gospel. Conduct your own due diligence to ensure that the asset you are planning on buying is worth your money.
It’s your money. You should be 100% sure what you are spending it on.
Take your profits
Hindsight is 20/20, especially when it comes to profit taking.
So many crypto investors wish they cashed out at the top of the bull run at the end of 2017, but many didn’t.
Taking profits is key - it’s not profit if you haven’t realized it by cashing out.
If you are happy with the return on your investment, consider at least realizing a portion of your profits. That way, even if the prices go back down you will have made some profit.
Earn passive interest
If you are a holder, have a think about lending your assets.
If you lend your assets to margin traders you can continue to hold while earning interest on your holdings.
It’s a great way to increase your crypto stack while you hold, with no extra work required.
Trade on leverage
If you are making profitable trades already, think about trading on leverage. It’s a great way to increase your profits.
Of course, trading with leverage increases risk. You will lose more if you get it wrong.
However, trading on leverage allows you to increase the amount of buying power you have, so your trade positions will be higher. Therefore, if the trade goes your way, you stand to make more profit.
Most top traders trade on leverage with very careful risk management.
This content is not financial advice and should not form the basis of any financial investment decisions nor be seen as a recommendation to buy or sell any good or product. Trading cryptocurrency is complex and comes with a high risk of losing money, particularly if you trade on leverage. You should carefully consider whether trading cryptocurrencies is right for you and take the time to learn how trading works and decide how much money you are prepared to lose.
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