Many people struggle to find an effective way of making money in the crypto market, making them continuously lose their money.
This post aims to provide you with proven tips to help you manage your capital and become a profitable crypto trader.
Before we go into the tips, one notable thing is that you know the financial market before investing your money to reduce the risk associated with the business.
Therefore, it's crucial to conduct research before investing in any project and don't invest all your capital in a single project.
6 Tips to be a Successful Crypto Trader
1. Defining your Portfolio Size
This is going to vary from individual to individual. Think about how much money you’re ready to lose.
Crypto is risky. There’s no getting around it. I wouldn’t advise spending your life savings on crypto. Assess how much money you have and use regularly.
You don’t want to become illiquid or lose the money you can’t afford to. I suggest starting small and gradually increasing your portfolio size.
This allows you to learn as you go. I started in 2016 by investing $500 in Bitcoin.
2. Defining your Risk Appetite
Crypto is volatile. You have to be somewhat distant from hazardous investments.
You have to be able to stomach ups and downs. A lot of people can’t handle 30% dips in their portfolio.
If this is you, altcoins might not be the best investment. You’re probably better off investing in blue chips.
You’re bound to go through ups and downs even with a good strategy. Make sure your risk appetite aligns with these ups and downs.
It would help if you didn’t sell at the first sign of weakness most of the time. This is a great way to lose money fast.
3. Portfolio Allocation
Your portfolio allocation will be based on your portfolio size and risk appetite for the most part.
Also, think about what goals you have. What kind of gains do you want? 2x? 10x? 100x?
The more money you want to make, the more aggressive you’ll need to be. You’ll have to take more risks.
If you have a low-risk appetite, then play it safe. Allocate more money to blue chips like ETH and BTC.
Based on your risk appetite, splitting your portfolio into smaller subsections is generally a good idea.
An example of an allocation:
• 40% in blue chips like ETH and BTC
• 40% in alt L1s like AVAX
• 20% in yield-earning stablecoins
Your portfolio is going to vary based on market conditions. I wouldn't recommend investing in high-risk altcoins under current market conditions.
They get slaughtered in bear markets and might not recover. When the market is weak, your portfolio should be more conservative.
4. Entering and Exiting positions
You must keep two critical things in mind when entering and exiting positions.
You want to go in with an exit strategy in mind. Figure out how much you want to make off of a trade.
To consistently be successful, you have to stick to this. Avoid holding unless you have extreme conviction in a project or token. Don’t get greedy. This is an excellent way to get burnt.
You’re not trying to time the market. That’s extremely hard to do and never ends well. It’s essential to take profits out constantly. Make sure you cover your cost basis soon.
If you do this, you can afford to let the rest run. That way, you don’t incur a loss. One good strategy to enter positions is dollar cost averaging.
Instead of throwing all your money into one asset, break the investment up into smaller, periodic ones. This reduces your risk and increases your chances of success.
5. Managing your emotions
Don’t FOMO, don’t get lost in the hype, and don’t let crypto get you down. Crypto is a marathon.
It’s going to be around for years to come. You’re early, so take advantage of that.
Tilting and getting emotional usually leads to rash decisions and overly risky behaviour. Try and separate your emotions from your investment strategy.
If you cannot do this, try and reconsider your portfolio allocation and risk appetite.
6. Manage your Risk
Risk management is challenging. It takes time and practice. There's no reason you can't implement these strategies, though. They'll help you elevate your trading abilities.