The cryptocurrency market attracts many people from different countries with super incomes. Indeed, there are no similar financial instruments in the world that would allow getting such huge profits in a short period of time. But a coin has two sides, since the greater the potential profit, the greater the risk. If you look at cryptocurrency live prices, you will notice that their values change much faster than traditional assets (stocks, natural resources, precious metals, etc.).
It is very difficult for novice users to understand all the nuances of the cryptocurrency industry. In this article, we will help to understand the features of cryptocurrency today, things that novice users should pay close attention to and how to distinguish a scam from a worthy project.
Points to Know Before Buying Cryptocurrency
As in any other financial transactions, you need to be extremely careful when investing in cryptocurrencies. The fact is that crypto rates are very volatile, so when buying a low-quality digital asset, you risk losing your money shortly. Below, you can see some important tips for novice investors.
Read the Technical Documentation of the Project
The key to successful investment is planning and thorough research. Before investing in a particular crypto project, make sure to conduct in-depth research. Every decent project must have the main document – White Paper. It’s a technical data document, a business plan, and a presentation rolled into one. It reveals details about a particular cryptocurrency’s philosophy, its operation mechanism, and its development prospects.
Before investing in any project, it is mandatory to read the White Paper on your own. It does not mean that the team will do everything planned, but you will at least understand how seriously the developers take their project. If the document is poorly written, it is a bad sign, so better pass by this project.
Discipline and Strict Adherence to Strategy
A trading plan, financial strategy, and discipline are the main factors for a crypto investor. You should clearly see your goals and devise a plan for different situations. As practice shows, improvisation is a bad companion for an investor. without a plan, your strategy will consist of spontaneous decisions, greed, and the syndrome of missed profits. With such an approach, both your deposit and nervous system will not last long.
By following a pre-planned strategy, you stay focused, allowing and targeting only those trades that meet your parameters and recommendations. The most important part of a trading plan is following it.
Adapt to New Circumstances Quickly
Cryptocurrency trading plan aligns your strategy with market movements. You work in a controlled environment and get measured results. This way, you can set investment goals. Moreover, the trading plan allows you to manage risks and limit portfolio losses. You can prevent excessive damage by maintaining a fixed risk/reward ratio. But if market conditions change dramatically, you should have a clear plan for this case. For example, if the current crypto prices go up or down sharply, you should make a decision quickly, and it is better to have a ready-made plan.
Don’t let greed drive your decisions. Newbies often invest in volatile cryptocurrencies because they experience missed profit syndrome. However, in the end, they lose their money because they have no idea when to sell the purchased assets. If making money was easy, most people would be rich, but the harsh reality is, unfortunately, different. Don’t let rush, emotion, or any other outside factor stop you from following the trading plan you’ve created.
Nowadays, every second person is a cryptocurrency expert – from Telegram group chats to YouTube videos, TikTok, and more. Information about crypto trading overflows the Internet, but you should not trust all sources.
The main rule of investors, which actually applies to absolutely all areas, and cryptocurrencies, in particular, is to draw information only from reliable sources. Read only top publications, but even there filter the information, as there are many promotional articles. Such materials, as a rule, are marked with the corresponding “sponsored content” label at the beginning or end of the article.
Invest No More Than You Can Afford To Lose
Start out small, buy cryptocurrency with the sum you can afford to lose without global consequences. Don’t let your emotions take over you. If you allow sensational headlines, billionaire tweets, and other distractions to guide your investment decisions, you will end up losing money.
Resist the temptation just because everyone is investing in one or another meme coin. It is better to research the currency on your own, stick to your trading plan and make sure your purchases are worthwhile. In no case do not sell your property, and even more so, do not take loans to purchase cryptocurrency.
Trust No One
People often start investing in cryptocurrencies without knowing all the pitfalls and scams. So they do not know how to protect against scammers. It makes them easy prey for attackers. Fraudsters may pretend to be government agents or celebrities. What do you think, will Elon Musk personally write to you and offer you money for sending him cryptocurrency. No matter how paradoxical it may sound, many people still fall for such tricks.
There is another type of scammers offering their “investment tips” in exchange for money or cryptocurrencies. Don’t fall for such schemes. It’s as simple as possible – do not trust people who promise you huge amounts of money for simple tasks.
Cryptocurrency wallet keys are not house or car keys; you cannot duplicate them. If you lose your key, you cannot restore access to your wallet and the money. At the moment, Bitcoins worth several billion US dollars have been lost without a trace. And although in some cases you can get your money back, this process will be long and exhausting. It is better to ensure that your key is not lost.
It is equally important to keep the key away from prying eyes. Do not leave the wallet open, and do not store the key in places that unauthorized people have access to. The best way to protect your key is to remember it or keep it in a safe place.
If you decide to store funds on a crypto exchange, take advantage of all the platform’s security features (complex password, two-factor authentication, a list of white wallets, etc.).
Avoid Leverage Trading
Trading with margin allows borrowing funds from an exchange or broker, investing them, and earning a higher income. That is, your $100 can turn into $10,000 and in case of a successful transaction, you will receive 100 times more profit. However, beginners should avoid margin trading because it also multiplies the damage to the portfolio in the event of a market drawdown. In the same example, if the coin rate goes in the wrong direction by at least 1%, the exchange will immediately liquidate this position, and you will lose $100. Such movements for crypto today take a few minutes or even seconds.
Diversification is the Key to Success
You should not focus on just one coin, but it’s also not worth buying 50 assets at once. Choose 5-10 worthy cryptocurrencies and actively monitor their performance.
To pick a promising crypto asset, check out coin price charts for pumps and dumps. Also, pay attention to coins’ market capitalization. It is advisable to choose from large and mid-cap coins. Large-cap assets demonstrate relatively stable growth and are resistant to market trends. Mid-cap coins have room for growth, which means they react to market changes more quickly and will multiply their value when the market skyrockets. Here are the best cryptos to invest in:
Final Thoughts: Why Should You Buy Cryptocurrency?
Cryptocurrencies provide a unique opportunity to earn substantial capital quickly. However, any investment likes a sober mind and an impartial approach. Therefore, it is possible and necessary to invest in digital coins, just do it responsibly and don’t stop learning better from other people’s mistakes.
In this guide for beginners, we have discussed the basics of the crypto industry and told you what steps a beginner should take to enter the market and minimize losses.
So do your research carefully, don’t stop education, stick to your trading plan, don’t get emotional, don’t trust self-proclaimed crypto experts, be always abreast of the industry updates and news, and get information from reliable sources.