Cryptocurrency trading is potentially one of the most profitable occupations. The possibilities in this business are limitless. With a competent approach and a bit of luck, it is quite possible to become a millionaire.
It is well known – the greater the potential profit, the higher the risk. The cryptocurrency market is subject to extremely high volatility. Recently, in early January 2021, the rate of Bitcoin rose to $42,000 and then fell to $30,000. All these changes took place in a matter of days! In such situations, the majority lose their money, but experienced and large traders become even richer.
In this article, we will describe the main things to avoid when trading cryptocurrencies. This guide will help you understand the main risks of trading digital assets and why you should avoid certain things by all means.
Don’t flatter yourself!
Trading is not a money-printing machine. More than 95% of traders lose money month after month, a year after year. Some even lose their families and self-respect.
Think before deciding to study trading. Without dealing with financial markets, you will be richer than over 95% of traders who constantly suffer financial and psychological troubles.
Trading is a real profession
Like any other profession, trading takes years of learning. It is impossible to master cryptocurrency trading within a month or so. It takes 11 years at school and another 5 years at the university to master the profession of an engineer. Now think, is it possible to master a new profession that can make you a financially independent person in a very competitive field in the shortest possible time?
Think about the long-term perspective
When focusing on Ethereum trading, forget about fast money. You can only lose quickly. It usually takes a lot of time to make money and make trading a permanent source of income.
You cannot pump up and build a beautiful body in one month of training in the gym, can you? Each workout brings you closer to the target bar, which is hard to imagine at the beginning of the journey. But it is, and its time will come if you make the proper effort. The same about trading.
Start with a demo account
A demo account is the first thing for a trader to start with. On a demo account, profit and loss are virtual. The trader does not risk anything at all while having the opportunity to master the trading terminal and start making the first transactions.
Trade on a demo account until you gain confidence in your trades and in what you are doing in general. It is important to do it meaningfully. Only after that, go to a real account and start exchange ethereum to bitcoin for little money.
Learn not to lose money
At the first stages of mastering exchange trading, try neither to earn nor to lose. First, learn to trade zero. Mastering the skills of trading to zero will allow you to gain the instinct of self-preservation of the deposit.
Trading zero is bordering on loss and profit. Having learned not to lose, the trader moves to the next level – to earn little by little. It resembles a career ladder where every next step is upward.
Be sure to manage your money
Money management is the only thing a trader can control in the market. Without knowledge on how to take risks, trading turns into roulette, in which the profit is just an accident.
Trading is a cold calculation and harsh money management. Minimize losses and let profits grow.
Use Stop Loss
This tool will warn the trader against losing the entire deposit if the Ethereum price has gone sharply against the movement he is expecting. And as you know, this is a usual thing in the cryptocurrency market.
Keep a trade journal
You should record all your transactions: entries, position management, exits. It is extremely important to analyze each closed trade.
A detailed analysis of transactions will allow you to find errors and eliminate them over time. Having learned not to repeat mistakes that lead to losses, we begin to effectively use the accumulated experience.
Trade only with your own money
Never take a loan, credit, or installment to open a trading account or replenish an unprofitable position that stands against the trend and does not have a protective stop loss. When trading with leveraged funds, it will be very difficult for you to stay cold-minded and adhere to a strategy.
Trading Ethereum and other liquid cryptocurrencies can make you financially independent. But to go this way, it is important to adhere to some rules, since this is a rather complex and competitive type of activity.