Day traders have been around as long as internet-based investing has. These are people who look for short-term buys and sells, hoping to make a quick buck, taking a lot of risks, but often without a real investment strategy.
Investing in cryptos can be a lot like day trading too. Or it can be based upon carefully planned out strategies.
Here’s the thing: in the world of crypto trading, you can still take risks but you can take them based upon sound strategies.
Developing Your Strategy – Here’s the Journey
You have several things to consider and decisions to make before you dip your toe in crypto trading. These steps should be a part of your journey and, while the risk is always there, will help you have a greater chance for success.
- Find a Good Trading Platform
You want a good place to engage in your trading – either dollars for crypto, crypto for dollars, or crypto for crypto. This will require a bit of research and listening to experts. But there are trading platforms that seem to be the most solid and recommended, so choose from among them.
You are looking for platforms with reasonable fees and highly secure systems in place, including security for your wallet, as well as for your personal information and your trading history/behaviors.
- Decide What You Can Safely Lose
This is critical.
You certainly are not going to risk investing next month’s rent. You know what your monthly living costs are; you know how much you want to keep in safe savings, and you should then be able to figure out how much you can risk.
And remember this: you have to accept the inevitable that you may, in fact, lose what you intend to invest.
Never invest more than you can lose without impacting your basic lifestyle.
- Long-Term Investing
Just as with stocks and mutual fund investing, long-term investments are made for growth over time, at least a year or more.
The goal is to hold investments to realize a large gain over time. This same goal is true for cryptocurrency long-term investing as well, even though the market is far more volatile than traditional long-term investments.
Long-term crypto investment is the easiest type of investing and is right for investors who:
- Don’t want or have the time to manage investments on a daily basis
- Don’t have a lot of confidence about the ability to analyze the technical aspects of cryptocurrencies
- Want to invest in the easiest method possible
Obviously, long-term approaches require little effort and/or expertise. The key, of course, is to pick the right currencies, sit back, and wait for the profit to be realized.
These are the questions to ask yourself before taking the long-term strategy:
- Can I let my money “ride” for the long haul? Because cryptos are volatile, there are often rollercoaster rides that will have to be seen through. Can I live with not checking value too often?
- What will be the conditions for my taking my winnings/profits – will it be based upon the fiat value or a percentage of gain? Once you set this, stick with it. Don’t get greedy.
- What would be a situation that would force you to sell off your investment? And if you have to sell at a loss, can you handle it?
When you answer these questions honestly and still feel ready to go for the long haul, you have the right strategy.
- Short-Term Investing
Short-term investing, like day-trading, means that you invest in crypto for periods of minutes, hours, a few days, or perhaps up to a month.
Short-term investing tries to take advantage of the volatility of the cryptocurrency market and to make quick profits through quick buying and selling.
This type of investing can be quite profitable, but it is definitely high risk, and losses can be swift and total. Because crypto prices change so rapidly and significantly, anyone choosing this strategy must:
- Be technically proficient – able to read charts and graphs
- Be confident with technical analysis
- Have a lot of time to spend reading and tracking on even a minute-by-minute or hour-by-hour basis
- Want quick profits/returns but are able to sustain quick losses as well. In other words, you have a high tolerance for risk.
There certainly is a higher risk with a short-term investment strategy, but there is the potential for high performance and gain.
General Crypto Investment Strategy Advice
There are some general strategies that should drive your crypto investing.
- Just like most investing, there should be some research involved. Looking at historical performances of cryptos you are considering, even if those histories are short, will provide you with information that reduces risk, especially for longer-term investing.
- If you want to balance long-term and short-term investing, use the 80-20 “rule.” Put 80% in long-term options and 20% in short-term (but only if you have the time and expertise to track them).
- Decide which percentages or fiat amounts of gain will satisfy you, for both long-term and short-term investments, and stick to those decisions. More than one investor has lost it all by becoming greedy.
- Educate yourself. This will take time, but it is the best way to be able to track and analyze the technical aspects of crypto investing. The more you learn, the better and more confident investor you will be.
- Because Cryptos are by their nature international in focus, some of the information you pursue may be in a foreign language. Getting that information translated via a professional agency, such as The Word Point, may be necessary before you make an investment decision.
- Be certain you have a secured wallet to store your assets. Use only reputable platforms that experts recommend and use themselves.
- To repeat: Never, never, never invest any more than you can afford to lose in total.
Most crypto investments are a big gamble, a bit like betting on horse races, especially if you are not an expert and have not educated yourself in the technical analyses involved. Make sure that you have tolerance for the risk involved; otherwise, you may lose some sleep.
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