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Many industries have been hit strongly by the global crisis that we are currently going through and the trading industry is one of those to have taken the biggest hit. However, cryptocurrency investors are the ones in a position to benefit from this crisis. But they have to be smart and follow some trade rules. Here are 8 tips for a profitable crypto portfolio in spite of the crisis.
1. Terminate a losing position, not increase it
Only inexperienced traders will choose to increase a losing position instead of terminate it. A common strategy that investors use is to average down. These investors tend to double down their position when they invest in a cryptocurrency and the price drops. This allows them to get an average price and reduces their loss.
However, this strategy is the worst one you can consider. It is common for retail traders that are inexperienced to fall for this. You should look to terminate and not strengthen your losing position.
2. Be prompt with switching sides
You should close the position on an asset when the price moves down continuously, especially if it gets to the stop loss. It would be a mistake for you to put in another bid for it immediately at that low level. But this is something that investors do commonly. At this point, you only have one option that you should put into consideration, and that is selling even more. To be on a safe side, it is better that you cut your losses very early and very regularly.
3. Do not dwell on your mental stress
Trading can be very stressful especially because of the possible financial loss involved. It is very difficult for traders in a position that damages the value of their cryptocurrency portfolio and can cause very serious mental stress which is harmful in all sense of the word. So, if you’ve just run at a loss, it is necessary that you take some moments out, maybe a few days. Just try to concentrate on other things like your well-being and your family. This protects from the mental stress that could have built up from the loss.
You will lose at some point. That is how it works. Just try to not get too emotionally attached to it.
4. Be neutral in a bullish market
Traders become bankrupt because they tried guessing the bottom. When a trade is at stop-loss, it is very likely the investor misread the market. After each loss, it is a brilliant idea to try to reevaluate the trends in the market.
When there is a bull market, the best thing is for traders to be neutral or long. But during a bear market, the trader should try to stay away from long positions irrespective of the timeframe. Before you build a position, be clear on the trend change.
5. Exit losing trades and wait on winning trades
With just 30% correct picks, it is possible for an investor to still be profitable. They only have to ensure that their stop loss is between 7%-10%, and they have to continue increasing their positions on their winning trades.
The trick is to buy more when there is a positive market trend and their position continues to go up. Use stop orders regularly to limit your losses and increase your position when there is a bull run. One strategy you can also try out is to enter trailing stops manually.
6. Strong market trends should be respected
When you notice a strong market trend, you should pay attention to such trends and respect it even more than your gut feeling or some ‘expert analyst.’
There are times you can be 100% certain of a price change and it does not happen. You should not be sentimental with the cryptomarket, and just focus on the trend.
7. Take advantage of market cycles
Market trades are cyclical and you should use this fact to your advantage. Investors can get positive results from almost any trade if they can correctly interpret and predict market trends. You can use this to your advantage as an investor by increasing your existing open positions and raising the stakes. When things do not go to plan, on the other hand, and market prices go haywire, take it slowly and reduce your positions.
8. Be patient
A veteran would know by now, that the market can go on for a long time without any trends. This is where patience is needed. You should know that long-term term trends are different from short-term trends. For the novice, they might not understand that most of the time, there is no clear direction in the market. So, if you have doubts, just hold on and do not build a position without confirming a trend.
Trading becomes a lot more difficult when people try to ignore the basics. As much as possible, try to be simple with your trades. It is not advisable that you trade more, you should trade less instead.
Kurt Walker has been working as an editor and essay writer in London for 3 years. He is also a professional journalist and content writer who contributes regularly with essay papers and assignment help UK. He deals in such topics as inspiration, productivity, education, and technologies.