5 Important Tips For First Time Cryptocurrency Investors
If you have started to invest in crypto, here are 5 tips for maximizing your efforts as an investor.
Investing in cryptocurrency can be a lucrative endeavor, but it also can be a risky one if you don’t have a full understanding of both the market and the best practices for maximizing your returns from your investments.
For first-time cryptocurrency investors that are just starting out, it can be very overwhelming to know the right moves to make, and understandably, you don’t want to make mistakes by making the wrong decisions. Especially with your hard-earned finances at stake.
Below are 5 tips for first-time cryptocurrency investors.
Do Not Let FOMO Dictate Your Actions
FOMO = Fear Of Missing Out
In the cryptocurrency game, there can be a tendency to want to invest in specific crypto because you see that everyone else is investing in it and you don’t want to miss the boat in doing so yourself. Or you feel prompted to sell your crypto because you see others are doing so also.
You simply cannot trade based on emotions. You need to analyze the market and make your decisions based on that as not doing so may result in losses for yourself.
Don’t get caught up in the noise from the news, blogs, social media, and other people because nobody can predict the future. As we have all seen throughout this year even, many unforeseen events have caused massive fluctuations in the market. This further reinforces the fact that the only thing that should influence your decisions about your investments, should be your own analysis.
Just to confirm, there is nothing wrong with listening to the news or opinions of others, but be sensible with how you utilize the information and take everything with a grain of salt.
Invest Only What You Are Willing To Lose
It goes without saying, don't put in more than you are willing to lose. You may be tempted to go all-in on specific crypto, but the market can be very volatile. In a blink of an eye, you can lose it all.
Be tentative with how you invest, put in an amount that you can afford to lose. A sensible benchmark to follow is 5% of your free cash flow (after expenses as a worst-case scenario).
Buy Low, Sell High
This is a common rule in all trading as it simply makes sense. Buy low, sell high. This is why it’s important to do your own due diligence, research, and analysis because you need to have your eye on crypto that may be flying under the radar that is worth you investing in now before it blows up and others start investing as the value increases.
Invest In Projects That You Believe In
Investing in projects that you believe in is beneficial because you will be more willing to do the necessary research to gauge your future moves regarding crypto.
Many projects will publish whitepapers before token sales which can give insight into what the asset offers.
You need to make sure:
- The coin has a purpose eg the features that differentiate it from other coins on the market.
- The development is a credible one eg checking out their website and seeing that they are legitimate. If there’s no information about their team or owners. Avoid.
- It’s clear what the project is about, the amount of money needing to be raised, the number of tokens or coins available for investors, and the length of the ICO campaign.
Do Not Jump Into Day Trading Straight Away
There can be upsides to day trading in terms of taking advantage of a market that never closes, is unregulated, is in its infancy, and offers transparent and open data for you to gauge future actions with.
With that being said, there are many disadvantages in doing so, enough to recommend that first-time traders not jump into quitting their jobs to focus on crypto trading full time.
Even though the market is 24/7, it means that there fewer parts of the day where you can execute predictable and profitable trades. It can be a large time investment to be looking at a screen all day waiting for shifts in the market to make actions as a day trader.
An unregulated market means that although anyone can start investing, there is no authority or insurance scheme to help recover your losses in case of hacking, exchanges being closed, or someone running off with your funds. This is always something that should be in your mind.
The crypto market is very volatile and any bit of news or information that goes out can send prices skyrocketing or plummeting. If you want easy trades then the unpredictability caused by a volatile market will make your life as a day trader very difficult.
All in all, being a crypto investor is not something you can think of to get quick gains without understanding how to maximize your efforts.
If you are willing to put in the time and effort to research and formulate your own strategies, then even as a first-time investor you can hope to have success in the crypto market.
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