The digital money market is full of pitfalls. You can lose funds when storing bitcoin, buying and selling it, concluding transactions on and off the exchange. How to start acquaintance with a new type of assets, how to avoid losses and develop trading skills
Economic shocks, financial market fluctuations, and Bitcoin halving have attracted new users to the crypto sphere in the past couple of months. This is evidenced, for example, by data from the online bank Revolut, which reported a 68% increase in investment in digital assets among British users.
The popularity of cryptocurrency has also grown in Russia. According to the Exmo exchange, before the BTC halving, the number of deposits made by users from the Russian Federation increased by 15-20%. The amount of replenishment of balances for a large amount also increased, that is, from $ 10 thousand.
Digital money is gradually spreading around the world, thereby attracting new users. However, beginners may have many questions, the lack of answers to which can lead to monetary losses and failure in this area of activity. We will tell you how to avoid this and where to start getting to know the crypto world.
The main thing
It is better to start your acquaintance with the world of cryptocurrencies by choosing a strategy. The main ones are investing or trading. The first implies the acquisition of an asset and long-term storage. The second is short-term speculation. A trader makes many transactions with digital assets, trying to get profit in a short period of time.
The methods of storing cryptocurrency differ depending on the chosen strategy. For investments, cold wallets are better suited. Thus, you can keep cryptocurrency on a computer or USB flash drive. Plus – security, no one can steal cryptocurrency without direct access to it.
The downside is illiquidity. If suddenly the coin rate begins to decline sharply and the user wants to sell it, it will take time to transfer assets to the trading platform. In addition to this, you can emotionally indicate the wrong address when sending funds, which will lead to their complete loss without the possibility of recovery.
Exchanges are best suited for trading digital assets. On them, the client can at any time sell or buy cryptocurrency, as well as use additional options. For example, leverage, with the help of which additional capital can be taken into management. However, this is extremely risky, since there is a possibility of losing all funds very quickly.
On some exchanges, you can also make a deposit in cryptocurrency or use the staking function. It allows you to receive passive income for storing coins. However, holding funds on trading floors is risky. They can go offline at any time due to a malfunction, be hacked, and funds, accordingly, stolen. There have been cases when unscrupulous company employees embezzled client funds. More details on how to store cryptocurrency, we talked about in another article.
When the choice is made, all that remains is to purchase the cryptocurrency itself. Large trading platforms allow you to do this through payment systems such as PayPal, Yandex.money and others, as well as using bank cards.
Cryptocurrencies can also be bought through exchangers and then transferred to an exchange or cold wallet. However, this method is not safe either. There is a risk of using the services of scammers or entering incorrect data when sending funds. If this happens, there is a 99% chance that the cryptocurrency will be lost. But, if you find yourself in such a situation, be sure to write to the technical support of the service. It is likely that employees will meet halfway and, if possible, help to recover the loss.
Trading digital assets is an extremely risky craft. The price of cryptocurrencies is volatile, it can fluctuate by 10-20% per day, sometimes by 50% or more. For example, on March 12-13, the bitcoin price fell from $ 8100 to $ 3800. In this regard, inexperienced users may get the impression that trading can bring huge profits almost every day. However, practice shows the opposite, as a rule, 90% of newcomers lose most of their capital in the short term and leave the market.
For this reason, it is better to start trading cryptocurrency with a practice account. Some exchanges allow you to create an account with a virtual balance. This will allow you to get acquainted with the market and the structure of the trading platform, and practice.
Then you can deposit a small amount on the exchange. Losses are inevitable, but this is an obligatory stage in becoming a trader. The beginner should get a feel for what it is like to lose money and hold a losing position. This will help the user understand his psychology: is he able to suffer losses and not make panicky, erroneous transactions, control himself and make decisions with a cool head. It is better to acquire this skill in advance, without paying large sums for such experience.
In addition, you should definitely turn to theory. For example, read scientific literature on trading, listen to lectures on this topic, take appropriate courses, get acquainted with technical and fundamental analysis. All this will help not only to see the ups and downs of asset prices on the charts, but also to try to predict them.
By studying the literature and experience of other traders and investors, you can also master various trading strategies. One of these is averaging. It involves dividing capital into several parts and investing in an asset in small amounts. This method will help you find the optimal point of purchase for the asset.
Averaging is a basic and probably the simplest strategy. In addition to it, there is also trading from levels, catching "lumbago" and "false breakouts" and others. We have analyzed them in more detail in a separate article.
What not to do
Newbies make a lot of mistakes and they usually cost money. In this regard, it is better to familiarize yourself with someone else's experience in advance in order to avoid unnecessary losses. To do this, we have prepared several rules that every novice user should follow.
Do not buy cryptocurrency on the news. As a rule, if the user found out about some news that should lead to an increase in the price of the coin, then this has probably already happened. If you bought it, be sure to use stop loss orders. These are bids to sell coins at a specific price. For example, if a user buys bitcoin at $ 9000, and the price rises to $ 9100, you can place a stop loss order at the point of purchase. In this case, the exchange will automatically sell the asset at the specified price, and the trader will not lose anything.
Don't be greedy. If you managed to buy bitcoin at $ 9000, after which its price rose higher, it is safer to sell some of the coins, and put the rest on a stop loss.
Be very careful about or not at all trust other people's signals to buy and sell assets. At the moment, Telegram and other social networks have many channels that publish cryptocurrency predictions. Their authors are not responsible for their subscribers' money.
Do not give capital to anyone, especially unfamiliar people, for trust management. And if you do this, then only with the conclusion of a contract approved by a notary. This practice has been popular in the crypto world for several years and often has a negative result for inexperienced traders.
Don't give in to emotions. Most of the losing trades are made precisely because of the loss of control.
Do not trade with the last money, and even more so with borrowed money. Making money on the cryptocurrency market is difficult, but for novice traders it is almost impossible. For this reason, you should invest only those funds that you do not mind losing. And definitely not invest capital, which may suddenly be required due to the prevailing crisis in the world caused by the coronavirus infection Covid-19.
Always have funds in case the price of an asset falls below the level at which you bought.
Don't neglect training. Trading in the cryptocurrency market is not a casino, but hard, nervous work. It can take years to understand how asset prices behave in a given situation.
Record your trades. This will help to evaluate and correct the trading strategy, as well as to identify the mistakes made.
Learn not to lose and recognize a loss. If you are not sure about the deal, it is safer to close it and wait for another, good moment. It is better to donate a small share of the capital to the market than to be stuck in a bitcoin bought at $ 20,000 for several years and miss the opportunity to buy it for less than $ 4,000 twice.
The cryptocurrency market abhors a game of luck. Here traders compete: retail and large. Some take the winnings, others leave the market empty-handed, and sometimes with debts. Therefore, you need to take digital assets trading seriously, calculate every step and think about the possible negative consequences.
A novice user should first decide on a strategy: investing or trading. Allocate an amount for this that he does not mind losing. Then buy cryptocurrencies on it and transfer them to an exchange or to a cold wallet. Previously, you can practice on a training account, read thematic literature and take courses, we have given examples of them in this article.
In the near future, we will make a whole series of educational articles in which we will tell you how to choose an exchange, buy digital coins with a lower commission, withdraw them and much more. Follow our materials.