Cryptocurrencies are no doubt quite a weird asset to many people who have never invested in it before. What is is exactly? How do you buy it and how and you make money from it?
These questions are all warranted and everyone has no doubt posed these questions some time in the past. These are the minor stepping stones that we take towards wider understanding and adoption.
However, all the simple steps help.
In this beginners guide to making money with cryptocurrencies, we will go over some of the most important steps that you can take in order to make money.
With that being said, let’s jump straight into it.
Do some Research
You cannot start trading cryptocurrencies unless you have some sort of an idea of what they are and which types you can trade. This does not have to be an in depth knowledge but it does help to know the basics of the coins.
These include concepts such as the blockchain, transactions, miners and exchanges. These are the factors that will determine supply and demand. As we all know, supply and demand is usually always able to drive price.
You will also need to read up on the factors that may drive the individual coins on the technology side. These include things such as code changes and hard forks. Any big changes to a cryptocurrencies technology is likely to drive the price.
Find A Broker
The broker is perhaps one of the most important pieces of the puzzle when it comes to making money with cryptocurrencies. This is because the broker will usually charge fees and these can eat into your profit.
Moreover, the tools that the broker gives you in order to trade can be indispensable. It is really important that the trading platform have features such as the latest charting, technical analysis and stop loss limits.
There are not too many brokers that meet this criteria yet one of the most well known in IQ Option. They are fully regulated in Europe and are one of the most established brokers in the industry.
Apart from the really low trading fees and the 15 different cryptocurrency pairs that you can trade, there are number of other benefits. You can read more about it in this IQ Option cryptocurrency review.
Practice Makes Perfect
Trading cryptocurrencies is not unlike any other skill that you learn about in life. It is essential that you spend the time to practice before you jump in. You want to make sure that you know what signals to look for, what news to listen for and which patterns to follow.
Although this can be read in a book, theory is often much more different than in practice. Nothing can quite prepare you for the feeling of actually entering a trade and hitting the buttons to exit.
A great deal of this is also done by gut and many of the best traders can attest to this. There is also the benefit of the IQ option demo platform. This is exactly the same as the live trading account except you are only trading demo “fake” funds.
Use Stop Losses
This is one of the most important risk management tools that people often dismiss when they start trading cryptocurrencies. They do not use any sort of risk management mechanisms like a stop loss that could prevent excessive losses or lock in sizable gains.
These stop losses are also placed around important technical levels when you enter the trade. They are chosen specifically for the purposes of making your trading decision automated. Moreover, you do not have to constantly be logged in if you want your trades to be effectively executed.
It is also important to determine how secure these stop losses are. Some stop losses are not guaranteed which means that they can easily be crossed through and you can lose all of your money.
While stop losses are great to manage risk for those trades that you have on, they are nothing more than trading instructions to enter / exit a trade based on a particular level. If you wanted more intuitive risk management strategies, then that is where cryptocurrency options come in.
These are instruments that will either pay you out if they are in the money or you will lose your initial “premium” if they are out of the money. This is why they are considered a favorable instrument given that that can be considered an “insurance” policy.
You can also enter these options depending on which side of the trade you want to “hedge”. It could be a “PUT” or a “CALL’. The latter will protect a short position and the former a long position.
Keep to Your Strategy
Trading cryptocurrencies can be quite a nerve wracking experience. Prices will move in a much more volatile fashion than one is used to in other traditional markets such as Forex or Shares.
Hence, it is really important that you have a strategy and you stick to it. Don’t let your emotions dictate what you do with this strategy. Far too often, people will have a strategy and then they will abandon said strategy at any sign of weakness. Do not let that be you.
This is further proof as to why you should first practice trading with a demo account before. In this environment you can test all of the different trading strategies in a non threatening environment.
Once you are ready to progress to the live account, you will have the right temperament to handle the emotional struggles that come with cryptocurrency trading.
Making money with cryptocurrencies can be tricky at first, but it is essential that you do not let your experiences dishearten you. You will have ups and you will have downs.
While sometimes the market is out of your control, there are a number of things that are in your control. These include such factors as your emotions, your strategy and your risk management. If you keep these in toe, you will no doubt reach your goals.
And always remember, never invest more than you are willing to lose. While trading can be lucrative, it can also be risky.