Safety rules are written in blood. That statement is familiar to every soldier serving their country. Although we are not talking about a risk to human life, losing one’s expensive bitcoins by making trading mistakes is definitely no fun.

So how can you avoid such mistakes and stay in the green?

First, it is essential to note that trading requires your full attention and complete focus 100% of the time. Second, trading is not for everyone. The following tips are easy to internalize because they were “written in blood.” However, it’s difficult to apply them in real-time and in actuality. After all, people are not rational.

The Tips: Quick Navigation

Have a Reason For Every Trade

Enter a trading position only when you know why you’re entering it and have a clear strategy in mind.
Not all traders are profitable.

Trading is a zero-sum game. This means that there’s someone on the other side of your trade. In other words, for everyone who wins, someone else loses on the other side – we can’t all win at the same time. Large crypto whales drive the altcoin market. Yes, they are the same ones responsible for placing huge blocks of hundreds of bitcoins on the order book.

The whales are just waiting patiently for innocent little fish like us to make trading mistakes. Even if you aspire to trade daily, sometimes it is better to do nothing instead of jumping into the rushing water and exposing yourself to substantial losses. There are days when it is better to keep your profits by not trading at all.

In fact, one of the toughest and most important things to realize as a trader is when NOT to trade.

Clear Stops, Clear Targets: Have a Plan

For each trading position, we must set a precise target level to take profit and, perhaps even more importantly, a stop-loss level for cutting losses. This involves deciding on the maximum loss we can afford to take before the position gets closed.

Several factors must be considered to correctly choose a stop-loss level. Most traders fail when they fall in love with their position or the coin itself.

Trade plan sample: stop loss and take profit levels. Chart by TradingView

“It will turn around, and I will get out of this trade with a minimal loss, I’m sure.”  – Something that plenty of traders say to themselves. They’re letting their egos take control.

Compared to the traditional stock market, where 2-3% is considered extreme volatility, crypto trades are a lot riskier: it’s not unusual to find a coin dumping by 80% just in a few hours, and nobody wants to be the one who is left holding it.

FOMO: Be Aware

Meet FOMO – the Fear of Missing Out. Indeed, it’s no fun being in a situation where a specific coin is being pumped like crazy with huge two-digit gains in just minutes.

That bold green candle yells at you, “You are the only one not holding me.” At this point, you will notice people flooding Reddit, Twitter, and Telegram trading groups, talking about the ongoing pump.

A classic pump and dump. Source: Steemit

What do you do then? It’s very simple: keep moving forward. True, it’s possible that many people ahead of you may have caught the spike up and that the market could continue in this direction, but bear in mind that the whales (as mentioned above) are just waiting for small buyers on the way up to sell them the coins they bought for lower prices.

The price has become high, and it’s clear that the current holders only consist of those little fish. Needless to say, the next step is usually the bright red candle which sells through the whole order book.

Risk Management: Not Just for Crypto

Pigs get fat; hogs get slaughtered. This statement tells the story of profits from our perspective. To be a profitable trader, you never look for the edge of the movement. You look for the small gains that will accumulate into a big one.

Manage risk wisely across your portfolio. For example, you should never invest more than a small percentage of your portfolio in a non-liquid (very high-risk) market. To those positions, we will assign greater tolerance; the stop and target levels will be chosen far from the buying level.

Bitcoin Is The King: Watch Out When Volatility Hits

The underlying asset creates volatile market conditions. Keep in mind that the smaller the market capitalization of the coin is and the lower the trading volume, usually the riskier and the more volatile it can get. This is because less money is needed to move the market.

Even BTC is a volatile asset compared to almost any fiat currency, and this fact should be taken into consideration, especially when the price of Bitcoin is moving sharply.

In past years, it was common for Bitcoin and altcoins to exhibit an inverse correlation, i.e., when Bitcoin rose, altcoins prices would fall against it, and vice versa. However, since 2018 the correlation has been unclear.

Regardless, when BTC is volatile, trading conditions are kind of foggy. During periods of fog, we can’t see far ahead, so it is better to have close targets and stop-losses set – or not to trade at all.

Foggy Market
Foggy Forest

Must-Have Tips for Trading Altcoins

Most altcoins lose value over time. They may bleed out slowly or rapidly, but the fact that the list of the largest 100 altcoins by market cap has changed so much over the past few years tells us a lot.

Take this into account when holding large amounts of altcoins for the medium and the longer term, and, of course, choose them wisely.

If you are considering holding altcoins for the longer term (months or even years) or building a long-term crypto portfolio, keep in mind that the altcoins that have higher daily trading volumes and significant community backing have more chances to survive.

You should follow the coin’s chart and identify low and stable periods. These are likely to be periods of accumulation, and when the right time comes, accompanied by positive project announcements, the uptrend will start. As mentioned above, the right time to buy into a position is not when the coin is pumping (a.k.a FOMO in a position).

As Warren Buffet said:

“Be fearful when others are greedy and greedy when others are fearful.”

ICOs, IEOs, and IDOs: The Token Sales

A word about public ICOs, which were later (2019) replaced by Initial Exchange Offerings (IEOs), and later (2021) replaced by Initial DEX Offerings (IDOs): these are crypto token sales. Many new projects choose to hold a crowd-sale where they offer investors an early opportunity to buy a share of the project’s tokens at what is meant to be a reasonably discounted price.

The motivation for investors is that the token will get listed on the secondary market, i.e., the crypto exchanges, and yield a decent profit for early investors. In recent years, there have been many successful token sales: ROIs of 10x were not uncommon.

One example was the veteran prediction market Augur (REP), one of the first-ever ICOs, which yielded investors a phenomenal 15x return on investment when trading started mid-2016. Since then, many projects, including many IEOs conducted on Binance, yielded even higher returns.

Okay, but what’s the catch? Not all such projects reward their investors. Many sales proved to be complete scams. Not only were they not being traded at all, but some projects disappeared with the money, never to be heard from again.

So how do you know whether you should invest in a given token sale? We wrote about this, and a key factor is the amount of money the project aims to raise. A project which raises too little will probably not be able to develop a working product (provided they have no other funding), while a project which raises a huge amount won’t have enough investors left out there to buy the tokens on the secondary market.

The most important of all is risk management. Never put all your eggs in one basket and invest too much of your portfolio in one IEO, ICO, or IDO. They are considered high-risk.

Practical Trading Tips: Start Today, Right Now

Here are some practical tips you can implement right away:

    • Fees, fees, fees: Making multiple trades means paying more fees. It’s always advisable (and cheaper) to post a new order to the order book as a market maker and not to buy from the order book (taker).
    • No pressure: Don’t start trading unless you have the optimal conditions for making the right decisions, and always know when and how to get out of the trade (have a trading plan). Pressure always hurts your trading game. Never rush! Wait for the next opportunity – you will get there.
    • Stop Loss – Take Profit: always set your targets by placing sell orders. You don’t know when your favorite coin will get pumped to clean up the supply on the order book (and pay a reduced fee on the “maker” side, remember?).
    • Place low buy orders: A successful strategy involves placing low buy orders to buy potential catch dips and even “flash crash” events. The following chart is taken from Kraken Exchange. ETH (yes, the second-largest cryptocurrency) flash crashed on February 2021 by over 60%. Whoever held low buy orders could have made a huge immediate profit as the price quickly recovered.
      Keep in mind that placing low buy orders requires special care; don’t wake up when you’re far away from the market to find that your buy order has been executed and now the price is even lower.

      ETH/USD. Source: Kraken

    • Buy the rumor, sell the news: This is true for almost any traded asset, whether it is a company share or cryptocurrency. When a positive announcement is anticipated by the parent company, sometimes you will notice that the news is priced-in. This means the price increase was prior to the actual announcement. Once the announcement is out, it’s the time when investors realize profit and sell. A great example was the Saturday Night Live show (in 2021) hosting Elon Musk. Dogecoin holders were anticipating (buy the rumor) DOGE price to soar as Musk would mention the meme coin on the main stage in front of hundreds of millions of viewers However, despite the mention – DOGE crashed 20% following the episode (sell the news).
    • FOMO – don’t rebuy after selling: You have made a profitable trade, but as always, the moment you sold, the coin runs up again. First, meet Murphy’s Law. Second, read over what was written here previously, and never enter a position under pressure or chase the FOMO. As long as there is profit, you are okay. Go on to your next trade, and don’t find yourself losing your gains.
    • Leave your ego aside: The goal of trading is to profit. Do not waste resources (time and money) trying to prove you should’ve been entering one or another position. Remember, no trader is always right. The equation is simple – the number of winning trades should be higher than losing trades.
    • Profit on the way down: Bear markets are sometimes the best times to make profits. If you haven’t heard about it, learn how you can short Bitcoin and other cryptocurrencies.

Ignore Financial News and (Most) Other Traders

Don’t waste your valuable time reading the news. The vast majority of the published analysis and news editorials you will find in the traditional press are biased or promoted by a particular company or group.

It’s better to invest your time in learning the long-term trends by reading educational content, not everyday news. You won’t find your next investment opportunity by reading the news. The opposite is true: if it appears in the news, then others must know about it, so they probably have a better edge. Buy the rumor, sell the news, remember?

Additionally, it’s best not to complicate your analysis by listening to other traders’ success stories. Competing with others can lead to unhealthy FOMO trades. Your skills will only improve if you concentrate on yourself, rather than buying coins, because one of your friends suggested it.

Have a Long-Term End Goal

In the end, remember that you are trading for a reason while investing funds that you could completely lose. Examples of goals could be quitting your job, buying a house, or retiring.

Thus, set your short and long-term goals and trade accordingly, i.e., do not risk funds you will need in the short term. Your overall goal should be aligned with all of your trading positions as well as your risk management.

Identify Crypto Scams in Seconds

Altcoins are very tempting, but remember that the cryptocurrency world received an enormous amount of attention, which brought many scammers into the field.

The idea that “you are responsible for your funds, not the bank” is indeed revolutionary, but it can also lead to inexperienced participants sending their funds away, thinking about a “high ROI” or investing in an ICO or IEO that will “change the world.” Unlike traditional finance, cryptocurrency has no insurance. Once you send your funds, they are no longer yours.

Learn how to identify crypto scams. Unfortunately, there are plenty of them around. Many entrepreneurs want your funds, and not all of them have the right reasons. Don’t waste time; think about why you should not be investing instead of contributing your valuable cryptocurrency.

What You Need to Know About Your Long-Term Portfolio

In the long term, only a few cryptocurrencies will survive. Looking at the top 20 coins ranked by market cap, you can easily see that beyond first place, which of course, belongs to Bitcoin, most of the rest change from year to year.

Since many won’t survive, you need to think wisely about which altcoins to include in your long-term crypto portfolio and what percentage portion of your portfolio each of those altcoins will comprise. You can’t time the market – another crypto bubble could develop at any time.

The Profit Is Temporary Until You Meet the Fiat

The fiat value of your crypto portfolio is key. As long as the everyday world’s money is fiat (dollars, euros, and such), you should measure your total portfolio’s value in terms of fiat currency.

Remember, until the fiat reaches your bank account, you have not cashed out. Cryptocurrency has no insurance, and if you are not following security rules, you can quickly lose your funds despite being a successful crypto trader.

Many investors saw their fiat holdings disappear despite keeping them on exchanges after selling their crypto. The most famous example of this was the Mt. Gox collapse in 2014. Another major scandal that could even rival Mt. Gox was the fallout of FTX in 2022.


Create a Group With Your Trading Buddies

There is a lot of information associated with the crypto world, and things move very quickly. In order to stay up to date, find a reliable group of friends with whom to share trading ideas as well as fundamental and technical data. Whether on Telegram or WhatsApp, chat groups contain members who are worth listening to – and others who should be ignored.

Enjoyed These Tips? There’s Even More

We will appreciate your share! We’ve also published more trading tips and a guide to common trading mistakes, which you can read here.


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By Sia