We’ve all heard dozens of stories about how people are making life-changing money in the crypto industry. Anonymous Twitter traders tell us how they turned $1,000 into millions in a matter of months by flipping cryptocurrencies and making 100x returns on their investments on a daily basis.
To the untrained eye, this appears to be a simple and safe way to become wealthy quickly. They quit their jobs to pursue a career as “professional crypto traders,” even before learning the fundamentals of trading and risk management. This narrative has a happy ending, as we all know.
Being a trader in any market is difficult — 95% of all traders fail, with the majority falling within a few months.
They usually go bankrupt or perform far worse than simply investing a large sum in a safe investment and watching it develop. For a variety of reasons, contrary to common assumptions, the crypto market is the most difficult to trade for beginners.
The casino is always open.
The market is open 24 hours a day, seven days a week, giving traders the impression that they must always be trading. For emotional traders, this results in a lot of exhaustion and FOMO (fear of missing out). Nobody can successfully track a market that is always open, and rookie traders have a hard time stepping away. This frequently devastates both their emotional and financial lives.
What are the fundamentals?
Fundamentals, which are the cornerstone of trading legacy markets, are lacking in the crypto market. A trader can examine quarterly earnings, sales data, the company’s road map, and a plethora of other success indicators while purchasing stock. More importantly, corporations that trade on the stock exchange are regulated and thus transparent, so you know exactly what you’re getting.
For the sake of a trader, the strength of a team or project in crypto is nearly meaningless. Traders rely on technical analysis, which can be difficult to master for newbies.
You’re probably aware that you should store cryptocurrency in a digital wallet, preferably offline on a computer, thumb drive, or mobile device, to protect your account. Furthermore, you should be aware that crypto currencies are very volatile, hazardous, and easy to manipulate.
Let’s talk about security if you still want to trade cryptocurrency. To begin, create an account with a reputable trading platform such as Coinbase or Robinhood. Yes, there are other platforms available, but you must begin someplace. Until you can sort the excellent from the bad, these two well-known, dependable companies will do the job.
By the way, stay away from any swanky online brokerage firms or cryptocurrency exchanges you’ve never heard of. Many of them are scam sites designed to take advantage of your inexperience. Please do your homework and never give your money to a company you don’t know. Here’s a thought: Before transferring your funds, call or email the brokerage to determine its degree of service. Better still, find out if the company exists at all.
Second, despite the fact that there are thousands of cryptocurrencies (some real, some false), stick with the world’s most popular and liquid crypto: bitcoin BTCUSD, 2.88 percent. Feel free to trade other cryptos once you’ve gained more experience (after bitcoin, Ethereum ETHER, 1.72 percent is the second-largest).
Let us now turn our attention to trading. “Can I earn money trading crypto?” is the first question most newcomers have. Yes, but it takes expertise, discipline, and diligence to do so. Cryptocurrency is still in its infancy, and it may take decades before it is acknowledged and backed by a government or institution (if ever). Buyer cautious until then.
The worst thing is that the crypto universe is rife with dark money, manipulators, and pump-and-dump operators who mislead you on social media, try to persuade you to buy their phoney currencies, or try to persuade you to join their phoney crypto exchanges. Crypto is currently pure speculation, but if you do your homework, you should be able to avoid scams.
Now that you’re aware of some of the dangers, here are the top ten rules that every new crypto trader should remember and follow:
1. Scale into a trade rather than investing enormous sums of money: If you’re new to cryptocurrency trading, it’s a bad idea to invest significant sums of money in bitcoin (or other cryptocurrencies) all at once. Because cryptocurrency is so unpredictable, instead of buying $1,000 in bitcoin, start with $200 and add another $200 if it’s heading in the right direction (up). Continue to add until your position is fully funded.
2. Buy and sell at extremes: When trading a volatile financial instrument like cryptocurrency, you must take profits on a regular basis. If your gains are excessive, sell half or all of them, but don’t leave anything on the table. When trading crypto, resist the impulse to be greedy (i.e. “Fear of Missing Out,” or “FOMO”), otherwise you risk losing most or all of your money.
3. Start modestly: Aim for tiny increases initially. Sure, some people have won millions of dollars trading bitcoin, but many more have lost all or a large portion of their money, just like lottery winners.
4. Never buy on margin: When you buy on margin, you borrow money from your brokerage to increase your buying power. This is the concept of leverage, and it’s a two-edged sword. You can make a lot of money if you’re right. If you make a mistake, you could end up owing more money than you put in. Wise traders manage risk, which means they don’t borrow money to buy cryptocurrency. (Once you get your first margin call, you’ll understand what I’m talking about.)
5. Use mental stop-losses: Stop losses are usually a good idea, but because cryptos move so quickly, “hard” stop losses are often ineffective (which is why many platforms won’t let you use them for cryptos). Instead, employ “mental” pauses and the discipline to adhere to them. A “time stop,” or telling yourself you’ll sell the position by a specified date, such as Friday, is another option. This is a good approach to force oneself to keep winners and get rid of losers.
6. Don’t hold losing trades: If a trade is going against you, sell all or half of it – don’t allow little losers to evolve into massive losers. True, people who sold bitcoin for $20,000 were taken aback when it soared to $60,000. Rule No. 7 will show you how to deal with it.
7. Have a trading strategy: It’s critical to have a trading strategy, especially when it comes to cryptos. Have a strategy in place to help you determine whether or not to buy or sell. Stick to the plan and follow the regulations.
8. Use technical analysis: Technical analysis can help you determine when it is best to enter or quit a trade. Moving averages and the RSI are the ideal indicators for novices (Relative Strength Indicator). They’re simple to understand and send out clear signals.
On the daily chart, bitcoin was trading considerably below its 20-, 50-, 100-, and 200-day moving averages as of June 30, 2021. (To get out of the cellar, Bitcoin must rally to its 200-day MA of $43,794.) Bitcoin remains slightly above its 50-day moving average on the weekly chart, despite stabilising.
On the weekly chart, the RSI for bitcoin is 44.72. Despite being oversold, it is not yet reached excessive levels. It’s severely oversold at 30 or lower, but don’t use the RSI to determine when to enter.
9. Diversify: Don’t deposit all of your money in one financial instrument. Purchase cryptocurrency, but diversify your portfolio with non-crypto investments. If that’s not an option, make tiny purchases until you’ve gained more experience and understanding.
10. Practice with a simulated account before buying: If a simulated or paper money account is available, practice with it before trading with real money. Rule No. 3 applies if you don’t have access to a test account.
Cyber security warning
Cryptocurrency is quickly becoming a tool for cyber thieves as more people invest and companies accept it as a payment option. Bitcoin already accounts for about 98 percent of ransom payments, indicating that this is already the case. Ransomware attacks are commonly used by cybercriminals to encrypt data and then demand payment in the form of bitcoin to decrypt it. Bitcoin wallets are an obvious choice for cybercriminals to get what they want while remaining anonymous because identities may be disguised in them. In July 2021, for example, ransomware organization REvil sought £50.5 million in Bitcoin from IT firm Kaseya in exchange for the unlocking of their files.
Cryptojacking is also used by cybercriminals over the cloud. Cloud cryptojacking occurs when hackers steal an organization’s credentials in order to obtain access to their cloud environment, rather than a local device, where they run their crypto jacking malware.
“Cryptocurrency has brought extensive risk, the full range of which isn’t yet visible. The massive amount of currency in play, the instability of platforms and the general lack of regulation around crypto makes it a favorite for bad actors. According to Cybersecurity Ventures, crypto crime is predicted to cost the world $30 billion by 2025. Well-known as the favorite currency of ransomware attacks, crypto also lends itself to scams.
These include “pump and dump” or “rug pulls,” both of which involve raising the price of currency and then dumping it, leaving investors in the cold; phishing scams to gain access to crypto wallets. Even decentralized finance (DeFI) platforms, which eliminate the middle layer of banks and other third parties in financial transactions, pose significant risks.
To stay current as the world rapidly digitizes, banks must examine the role of these and other blockchain-related technologies – but until regulations, risk monitoring and governance catch up, the risks are significant. It is important to implement strong, active cyber risk management, monitoring and governance; collaborate with quantitative and qualitative insight across your cyber and business teams; and stay agile to stay ahead of tomorrow’s risks today.”- Shankar Bhaskaran, the Managing Director of Metricstream India.
Prioritize password protection:
To prevent unauthorised access and deny cyber criminals the ability to engage in cryptojacking, businesses should combine excellent password management with multi-factor authentication. Cyber thieves will be less likely to acquire access to cloud environments and IT assets as a result of this.
