Crypto and trading stocks can be challenging, so here are 6 suggestions for beginning 2022 in a smart way.
There is nothing that can be conducted to safeguard a person from the volatility of crypto price swings, irrespective of how skilled they are in trading. Bitcoin's (BTC) fluctuation, which is a common measure of daily changes, is currently at 64% annualised. In comparison, the S&P 500 has a fluctuation spec of 17%, while WTI crude oil has a volatility spec of 54%.
Though, by following five simple tips, it is easy to prevent the psychological effects of a 25% intraday price movement. To maintain throughout intervals of high fluctuation, these strategies do not need advanced tools or a huge amount of money.
Make a plan not to withdraw money for at least 2 years
Assume you have $6,000 to invest, but there is a significant chance you will need a minimum of $3,000 of it in the next 12 months for vacation, vehicle maintenance, or some other activity.
The worse move you can take is to make a 100 % crypto investment since you can end up having to sell your holdings at the worst possible time, like at the bottom of a phase. Although if the proceeds are intended for use in decentralised finance (DeFi) pools, the threat of impaired losses or attacks that deal with access to the funds exists.
In a nutshell, any funds allotted to cryptocurrencies should have a maturity time of two years.
Always use the dollar cost average
Fear of missing out (FOMO) can overtake even expert traders, leading to a rush to create a position as rapidly as feasible. But, if anyone is receiving 50% or higher returns consistently, and even meme coins are performing well, how can you just sit back and watch?
The DCA approach includes purchasing the same dollar amount every week or month, irrespective of market fluctuations; for example, buying $300 every Tuesday afternoon for a year eliminates the stress and worry associated with choosing whether or not to add a stake.
At any cost, avoid purchasing all of the positions in less than three or four weeks. Keep in mind that crypto adoption is still in its development.
When performing analysis, avoid using excessive measures
There are many technical indicators, such as the moving average, Fibonacci retracement levels, Bollinger Bands, the directional movement index, the Ichimoku Cloud, the parabolic SAR, the relative strength index, and many others. There are countless ways for monitoring these indicators when you consider that each has different parameters.
The top traders are aware that accurately analysing the market is more vital than selecting the best indicator.
Some people choose to examine correlations with traditional markets, whereas others concentrate on crypto price charts. Except for striving to monitor five different indicators at the same time, there is no right or wrong here.
Markets are versatile, and this is notably relevant in crypto because of how quickly things change.
Understand when to take a step away
When it comes to identifying bottoms or altcoin seasons, you will gradually misread the market. Every trader does get it mistaken at times and there is no requirement to reimburse by instantly raising the bet size to recover the losses. That is accurately the opposite of what should be done.
If you get a "bad break," take a few days off. The psychological effect of loss is considerable, and it will impair your ability to think properly.Even if a clear chance occurs, pass it up. Aside from trading, go for a run or try to manage your life.
Successful traders are not necessarily the most skilled, but instead, those who have lasted the longest.
Maintain investing on winners
As investors have a basic propensity to profit on our winning positions, this may be the most difficult lesson of all. As previously stated, crypto market fluctuation is extraordinarily high, thus striving for a 30% gain will not be enough to compensate for your prior (or future) losses.
Traders should purchase more winners instead of selling them. Of course, market data and overall attitude should not be overlooked, however, if your views remain positive, try extending to your position until the entire market shows signs of a downturn.
By being bold and maintaining on to the most beneficial situations, one can finally grab a 300% or 500% gain. Do not be shocked if you see these returns because you expected them when you entered such a risky market.
Some rules exist to be broken
Many people would have discovered a roadmap to crypto trading success after several years, and the profits would have faded soon. That's why, now and then, you should be prepared to break your own rules.
Do not take influencers' or skilled money managers' investment advice blindly. Everyone's risk tolerance and ability to add positions following a loss are different. However, most important, remember to look after yourself while you are on your journey!