Cryptocurrency is one of the most lucrative markets to trade. As a cryptocurrency trader, success means different things to each trader. For some, it may be taking profits in a live trading account on a 30-minute chart. For other people, it may be profiting from shorting cryptocurrency CFDs.
But ultimately, success will come down to making a favorable return on your risk capital.
As with any business, the tools and information you use will have the most decisive impact on your overall success.
To be a successful trader, it is vital to identify a set of rules and stick to them. Here are three rules to increase your winning trading percentage:
Combine fundamental and technical analysis
Cryptocurrency is a combination of finance and technology. It is a fast-paced industry that is constantly evolving. Furthermore, the perfect trading setup combines fundamental and technical analysis.
The cryptocurrency market can react to information about the characteristics of new coins. Many traders will panic buy for fear of missing out, so it’s important to stay one step ahead of the crowd. You can do this by incorporating fundamental research into your daily routine.
From a technical standpoint, it is nice to support your research by charting price action on a chart. Traders use charts to gauge price action in order to develop good price entry strategies.
Choose quality over quantity
The biggest mistake people make in cryptocurrencies is trading in the market. Most of the time, there is a 50/50 chance that the price will move in your favor. Smart traders know how to be patient and increase the probability of taking advantage of price inefficiencies.
Often, the best time to trade is when the market becomes exaggerated. There will be times when you want to ride the strong momentum and other times when you want to be a contrarian by thinking backward.
Being a successful trader is more about managing risk than it is about being right all the time. It’s impossible to be accurate 100% of the time. There are times when you may find yourself on the wrong side of the market and cryptocurrency trading. Do you have an exit strategy for trades that are on the wrong side?
Traders who stubbornly stick to their guns despite their mistakes will learn this lesson the hard way. There is a good balance between sticking to your plan and remaining flexible. Before entering a trade, it’s a good idea to measure the risk-to-reward ratio and determine the stop loss area you want to set.
Knowing when to enter a trade is one thing, but mastering the timing of your exit can be more challenging. Close a position too early and you’ll cut into your profits. Hold a position too long and you may lose your gains. You can manage your trades more effectively by constantly adjusting your positions as you trade. There is a maxim in the trading world that says, “Cut your losses and let your winners ride the wave.”
Don’t stress during the trading process. They say the best traders have mastered the art of staying calm when things seem to be spiraling out of control. Yes, I know it sounds crazy, but you have to develop the skill of not trading emotionally, but objectively. Look at it this way, it’s not uncommon for cryptocurrency prices to fluctuate by double-digit percentages in a single day. If you have enough experience and can manage to pick up 1% per day, then at the end of the year your cryptocurrency investments will grow 365%.
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