There are 1583 cryptocurrencies listed on coinmarketcap.com. That is more than all the different types of fiat currencies in the world. More than 300 million people globally hold and use cryptocurrency as per various media sources. Unfortunately, this asset class is not regulated, therefore people have little to no protection in case something goes south.
There’s no doubt digital currencies have seen remarkable growth. Spurred on by the incredible growth of bitcoin (BTC) and ethereum (ETH), the field of cryptocurrencies has only continued to expand.
Before taking the plunge in crypto trading, take note of this checklist of dos and don’ts
Do your own research
Social media is abuzz with different groups supporting one crypto or the other, or pulling it down. Don’t follow the herd. Do your own research to try to understand the project behind the crypto token you are interested in. Only invest in it if you understand its meaning.
Understand the role demand plays in liquidity and stability of a cryptocurrency
The higher the demand and the community backing, the more profitable the cryptocurrency is for the investor.
Beware of suspicious initial coin offerings (ICOs)
Initial coin offerings (ICOs) are similar to a stock initial public offering (IPO). Crypto companies have no proven track record or facts. They simply sell their crypto project’s vision to people, which may or may not be successful. Always read the whitepaper before investing in any ICO.
A report published by the U.S. Securities and Exchange Commission (SEC) in 2017 regarding ICOs stated: “…investors should understand that to date, no initial coin offerings have been registered with the SEC… As with any other type of potential investment, if a promoter guarantees returns, if an opportunity sounds too good to be true, or if you are pressured to act quickly, please exercise extreme caution and be aware of the risk that your investment may be lost.”
Understand your risk-reward acceptance level
Each investor’s risk-reward tolerance differs. Understand your own. Try to find how much capital risk you are willing to undertake to earn this return. You can consult with a financial advisor to find out your risk appetite.
Control your emotions
Fear and greed are two emotions that lead to impulsive decisions while trading. Even the most professional traders feel greedy and fearful. You should learn to control your emotions to avoid bad trades.
Have a trading plan
A trading plan always works in the long run. Having a trading plan helps you avoid bad trades. Revisit the plan from time to time and re-align the plan to suit the changing market conditions.
Follow time-tested strategies
If you’re just starting out, you can follow established trading strategies. You can find quite a number on the internet. As you get experience in the cryptocurrency market, you will be able to make your own trading strategy.
Choose a reliable crypto trading platform
There are many platforms available for crypto trading, among which a lot of them are scams. Before transferring any funds for trading, go online and learn the legitimacy of the trading platform.
Have realistic expectations
Just because a certain cryptocurrency has performed extremely well in the past, doesn’t mean it will do so in the future. Don’t expect huge profits overnight and be prepared that the valuation may go down as well.
Don’t fall prey to fake news
With the crypto market still evolving, lots of news arises which make traders act irrationally. This leads to bad decisions and losses. Don’t follow the herd. Always check the authenticity of every news you come across and act only if it is authentic.
Learn more about cryptocurrencies and crypto trading by enrolling in Basics in Cryptocurrency and Digital Money at Finstock Evarsity College. Follow the link below to apply.
Basics in CryptoCurrency and Digital Money