Cryptocurrency Trading: Five Essential Tips to Understand
2018 didn’t exactly go exactly as planned for cryptocurrency investors.
Many of us watched as our investments sank by more than 80% in some cases. But much like previous bear markets, this too shall pass. In fact, many investors (72% according to a Shares Post survey) plan to buy even more over the next 12 months.
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However, before investing, there are key tips to be aware of.
Tip No. 1—Due Diligence is Key
For one, traders must be diligent, and do their own due diligence prior to cryptocurrency investing. Only invest in the most reputable of coins, like Bitcoin (BTC), Ethereum Classic (ETC), perhaps even 0x (ZRX). In short, invest in widely known, reputable coins with volume.
Failing to do so could result in serious problems, including the very real potential for fraud and loss with the wrong coin.
Tip No. 2 -- Ignore the noise in the cryptocurrency space
Oftentimes, you’ll hear that cryptocurrency is just a fad, even a get-rich-quick scheme. However, there’s a growing global population that’s embracing it and the technology behind it. Even Fidelity, Goldman Sachs and countless investors, like investor Michael Novogratz are quickly entering the space with technology and interest.
Investment firm, Fidelity is launching Fidelity Digital Asset Services, for example.
In fact, the new company will offer custody and trade execution for digital assets. All in an effort to target institutional investors like hedge funds and family offices.
“Our goal is to make digitally-native assets, such as Bitcoin, more accessible to investors,” said Abigail P. Johnson, Chairman and CEO of Fidelity Investments. “We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use.”
Not only will the company offer client services, and trade execution for digital assets, it will provide a secure, compliant storage solution. By doing so, it’ll help foster growth and potential further interest among institutions. Remember, institutions are the missing part of the cryptocurrency future at the moment.
Tip No. 3 – Diversification is key
Three, cryptocurrency diversification is key.
“Putting all your retirement money into a single stock or one type of investment vehicle is considered unwise. If that investment goes south, you could lose everything. In general, financial experts recommend buying a mix of assets, or diversifying, because it’s nearly impossible to predict when a single stock will take off … or fail,” says CBS News.
Tip No. 4—It’s Not Just About When to Buy
It’s also about knowing when to sell. In fact, many of us don’t know when to sell at all.
Granted, it’s tough to sell when your coin is skyrocketing, but sell too late or not at all, and you can kiss any hard-earned money goodbye. We’ve all seen it happen.
Buying a coin is the easy part. Knowing when to sell and walk away – that’s the hard part. Traders are afraid of pulling the trigger and selling because they’re fearful of what could possibly happen. One of my favorite ways to tell when it’s time to take my money and run is with technical tools, such as Bollinger Bands (2,20), MACD, RSI and Williams’ %R.
Tip No. 5 – Protect your Cryptocurrency with a Wallet
Bitcoin and the other digital currencies are digital. They’re not going to sit in your wallet like fiat. Instead, they’re going to remain secured in a digital wallet. With that being said, you need to make sure that you’re choosing the right digital wallet. Otherwise, there is a good chance that you’re never going to be able to access, use, or sell your Bitcoin.
As the space just begins to heat up, these are just a few smart tips to keep in mind.
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