Positive results and profitability from cryptocurrency trading have seen more people join the industry in recent years. Besides, it is a secure alternative for making fast cash. However, crypto trading is not something that you just dive into and become successful. It is more complicated than conventional securities trade.
Cryptocurrency trading involves more advanced rules and sophisticated technology. In addition, strategy plays a vital role in helping a trader realize profits while minimizing losses. Whether you are more of a bull or a bear, the following are the top 10 must-have skills for successful cryptocurrency trading.
1. Managing FOMO
There are periods where the coin value in the crypto market rise serially. What follows is numerous headlines of “cheap fast profits.” The fear of missing out (FOMO) drives people to join the crypto trade. Inexperienced traders, unfortunately, fall for whales, who are dishonest traders waiting for such periods to defraud newbies. Successful traders learn to manage their FOMO and only join cryptocurrency trading when they are ready. Read more on the common cryptocurrency scams and how to avoid them.
2. Be Goal-Oriented
Trading cryptocurrency is not a guessing game. The ultimate goal is realizing profits. However, to achieve this, successful traders have to formulate smaller goals in their trading strategies such as setting a stop-loss order to minimize losses when prices fall. Injecting funds into your trade with no set goal is just as good as committing financial suicide.
Additionally, crypto trading is a zero-sum game. When one person is winning, the other is losing and vice versa. You won’t always make profits, nor will you always realize losses. Therefore, understand your goals, adjust the stop-loss limits accordingly, and only trade when you stand to make profits.
3. Have Defined Profit Targets and Loss Limits
Cryptocurrencies are the only tradable assets whose value fluctuates in double digits. It is easy for a trader to want to trade every time prices rise. However, the volatility of the crypto market could tempt you to undertake greater risks than necessary. You, therefore, need to ask yourself a couple of questions. How much profit do you want to make? What is your stop-loss level? Defining these parameters is a skill that disciplines your trading and at the same time, protect you from unnecessary risks.
4. Portfolio Management Skills
Managing your portfolio is a continuous process. Each time you make a profit or a loss, your portfolio adjusts. Automated trading terminals like Superorder perform the portfolio analysis in the background and present you with a summarized chart. Successful traders take time to study their portfolio and re-adjust them accordingly. For instance, should you find that trading Ethereum is more profitable than Litecoin, you could adjust your portfolio and trade more Ethereum until the Litecoin price rises.
5. Managing Risks
Most beginners start cryptocurrency trading to realize fast profits. They forget that crypto trading is an investment like any other, and investments carry some risks. Successful traders recognize the risks associated with trading and manage them well. For instance, they trade to gain small profits that accumulate over time.
Additionally, managing risks is a skill of strategy. Successful traders seclude a small portion of their portfolio to invest in the highly risky non-liquid market and a greater portion in the liquid market. Non-liquid market trades have greater tolerance, and prices do not fluctuate as much.
A traders’ ability to separate events from others to have a different perception about them is a skill in itself. It is a must-have skill for any trader who is hoping to understand their failures and learn from them. Professional traders also make losses. In such situations, successful traders review their trading charts and isolate the specific trade that led to losses.
Isolating the specific event helps in changing its perception. For instance, a loss that is realized from a constant drop in prices can work to a trader’s advantage, whereby they sell crypto coins and wait to repurchase them when the prices hit an all-time low.
7. Pattern Recognition
Trading terminals provide traders with simple analytical charts that summarize their trading patterns. The mentioned terminals such as Superorder provide extended charts, which make it easier to manage your trading on multiple systems. Successful traders learn to recognize the market patterns and compare them with their trading systems. This helps in creating harmony between your trading strategies and the market trend.
Adaptability is the ability of an individual to change their thinking and opinion when presented with certain information. It is a must-have skill for any trader. Your trading moves rely on your trading strategies, which are, in turn, tested by the market behavior. The crypto market is, however, very volatile with frequently changing conditions. Therefore, traders have to change their strategies from time to time. Besides, successful traders learn to adapt to the market by testing and changing their strategies as many times as necessary.
9. Emotional Detachment
Ever heard of the saying “check your personal issues at the door when you come to work”? It simply means that you should not let your emotions affect your work performance. In crypto trading, the rise and fall in prices lead to great profits and losses. Successful traders learn to leave the emotion out of the trade. They learn to stop trading once they reach their profit targets and never trade beyond their stop-loss limits. Emotional detachment is a skill that keeps the trade professional.
Last but not least is skepticism. It is defined as the doctrine that no fact or principle is known for certain. In other words, skepticism means: doubt what you think you know. Many may claim that skepticism works against your trading confidence, but in fact, it protects traders from being taken advantage of.
When trading, your money is on the line. New traders are advised to be skeptical of the anonymous trading advice and tips they receive, as these could be whales looking for a chance to defraud you of your money. Learn to be skeptical of the motive of such individuals and rely on facts until you know better.