• “Cryptocurrencies are extremely volatile, highly risky and easily manipulated”
• Michael Sincere gives important tips for crypto traders
• “Skill, Discipline and Duty of Care”
Cryptocurrencies are extremely volatile, risky and easily manipulated, says Michael Sincere, author of non-fiction books on investing and trading in the stock and options markets and financial columnist for MarketWatch. That’s why he wrote a new article summarizing tips for crypto beginners. Because when trading Bitcoin & Co., there are a few things to consider.
Advertising
Trade Bitcoin and other cryptos via CFD (also with leverage)
At Plus500 you can benefit from rising and falling crypto prices – also with leverage. Test the free demo account now!
Plus500: Please note the Hints5 to this advertisement.
Good research is essential
First, interested investors should inform themselves extensively, advises Sincere. In any case, the new account should be opened with a well-known trading platform, such as Coinbase or Robinhood. Although there are numerous providers in this area, many of them are scam sites. The financial expert therefore recommends not choosing a provider you have never heard of before. If you are still unsure, Sincere advises you to practice with a simulated account before investing real money.
Bitcoin first, then the rest
In addition, at the beginning of your career as a crypto trader, you should stick to the most popular and well-known cyber currencies. So Sincere advises investing in Bitcoin first. Once you have gained some experience, you can venture into the second largest digital currency, Ethereum.
Start with small sums
According to Sincere, instead of investing several thousand US dollars in cryptos straight away, it is advisable to start with a few hundred US dollars and slowly increase if necessary. Crypto beginners should aim for smaller profits at the beginning and remain realistic.
Never buy on margin
In addition, in his opinion, one should never buy on margin. Because: If you are correct, you can win a lot of money. If you get it wrong, however, you may end up owing more than you invested. “Smart traders manage risk, and that means they don’t borrow money to buy crypto.”
Buy and sell
“Whenever you trade a volatile financial product like crypto, you routinely need to take profits,” advises Michael Sincere. It is also advisable not to hold any losing positions. When a cryptocurrency falls, don’t be afraid to sell it in a timely manner.
Mental stop losses
Since Bitcoin, Ethereum & Co. move very quickly, it is hardly possible to set “hard” stop losses. For this reason, Sincere advises mental stop losses. Alternatively, you can also use time stops, which means that you decide in advance for a specific day by which to sell your positions and then follow this. In this way, potentially large losses can be avoided.
draw up a trading plan
“Have a plan to help you decide when to buy or sell. Follow the plan and stick to your rules,” Sincere continues. The financial expert reminds us that technical analysis is also helpful here. The focus here should be particularly on the moving averages and the RSI (Relative Strength Indicator), because these indicators are quite easy to understand and interpret even for beginners.
diversification
“Diversify: Never put everything you own into a single financial product,” Sincere strongly advises.
In general, according to the financial expert, crypto traders who are still in their infancy should always exercise particular caution when trading Bitcoin & Co. Because it could still be years before digital currencies are accepted or even supported by the government or institutions, provided that Sincere warns that this will ever be the case. Therefore, “dexterity, discipline and duty of care” should always come first.
Editorial office finanzen.net
Image sources: AlekseyIvanov / Shutterstock.com, Stanislav Duben / Shutterstock.com