Eager to start spot trading with cryptocurrencies? Here are a few tips that will come in handy in your trading journey:
#1. Have a clear motive before entering each trade
Identify what is the purpose of your trading activity. It is important part to know why you’re trading cryptocurrency to be able to understand which strategy you will use. You could be day trading or scalping if it floats your boat but you will know once your purpose is clearly defined. Remember that trading has two sides, every time you win, someone else loses and vice versa.
#2. Take profit and use stop losses
Each trade you enter should have well-defined entry and exit points. Irrespective of whether you are gaining or incurring a loss, you should have these two points clear. When you have identified the stop loss level, it will help you mitigate potential losses and not a lot of traders know how to do that.
Stop loss is a key risk management strategy that will keep you from making impulsive decisions based on emotions. One of the best points to set up your stop loss level is at the original cost of your coin.
#3. Don’t fall for FOMO!
FOMO is such a common reason that leads to the downfall of so many traders. As someone looking at another trader’s trades from the other side watching them take home enormous profits in a few minutes can get intense. But that is the moment you should exercise great caution and avoid jumping into the bandwagon without giving it enough thought.
Generally, these coins are with the small traders which send a red signal to the market as there’s an oversupply which leads to losses.
#4. Manage Your Risks
A smart investor will not blindly chase profits, ever! They would do the wiser thing of accumulating many small profits consistently. To be such a smart trader, you should first make sure that a major part of your portfolio is in a liquid market. High trades demand better tolerance and stop loss as well as profit targets are typically set away from the buying level.
#5. Don’t Buy Simply Because the Price is Low
A rookie mistake that most beginners tend to make is they buy a token whose price is low. While such tokens may seem affordable, making a profit depends more on a token’s market cap than its affordability. So if you choose to buy say Ripple, over Bitcoin or Ethereum you may have to wait for a long long time before Ripple comes at par.
6 best coins for spot trading
- Bitcoin (BTC): Massive Liquidity
Bitcoin continues to be the largest and the most valuable cryptocurrency in the market. It enjoys popularity globally and is significantly liquid which makes it a great pick for day-trading cryptocurrency.
At present, it is hard to find any other crypto asset other than Bitcoin that has been embraced by exchanges globally. Bitcoin owners also have the option of making profits through arbitrage trading.
- Ether (ETH): Large-Cap Coin With Massive Potential
Second to Bitcoin is Ether which also enjoys a billion-dollar market share. It has grown significantly over the years which has encouraged several traders to buy more of these tokens and trade.
Ether is a native coin of the blockchain Ethereum and its value remains tied to it. Ethereum is essentially a little too good to fail. We’re not the ones claiming this, it is Ethereum’s position as the largest layer-1 smart contract blockchain that implies this. Being one of the popular cryptocurrencies, Ether often makes headlines because of the constant innovation that takes place on the Ethereum blockchain or due to another adoption by an exchange.
- Litecoin (LTC): Fast Blockchain Generation Speed
Litecoin, also known as LTC, was launched in 2011. It works on an open-source network globally and is decentralized. It also utilizes a password key generation function known as ‘script’.
Though it has a lot in common with Bitcoin, LTC is more efficient in processing transactions as it has a faster block generation speed.
- Ripple (XRP): A Global Decentralized Payment System
Ripple operates at an international level that has been backed by prominent financial institutions recently. It is a decentralized payment system that offers quick and secure payment functions.
When it was launched in 2012, the purpose was to enable banks to carry out international transactions in real time. Ripple’s token XRP is a unique cryptocurrency that cannot be mined. It currently enjoys a market cap of $21 billion and is priced at $0.3115.
- Binance Coin (BNB): Easy Fundamentals To Read
Binance Coin or BNB is one of the most prominent exchange tokens in the world that was launched by Binance. It is known for several advantages in the Binance ecosystem, from payment of fees to BB vault staking that leads to a constant increase in its value.
BNB is a liquid token that is widely accepted by a number of crypto exchanges. It is the third-largest cryptocurrency in the market today.
- Avalanche (AVAX): “Layer one” Blockchain
Avalanche is a comparatively new ‘layer one’ blockchain. A layer one blockchain works towards making improvements in the existing protocol that formed the base. This adds up to make the system scalable. Avalanche was launched to compete with Ethereum. The difference between the two is that while Ethereum’s nodes have to verify every transaction, Avalanche has three different blockchains that can validate the transactions on their own. Because of this, Avalanche is more scalable and can handle up to 6,500 transactions per second.
AVAX started trading in 2020 and since then its prices have hit a low of $9.34 to a high of $146.22 in the last one year. Presently (July 1), it trades for $16.29.
Final thoughts
There’s little doubt about the future of cryptocurrencies. They’re definitely here to stay but the bigger question here is–where do you invest your money? Bear in mind that cryptocurrency trading is not a become-a-millionaire-overnight kind of scheme, it is more of a long-term investment once you decide which crypto works for you.
