Best practices to follow when investing in the crypto industry in 2021 and beyond

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Plenty of opportunities exist in the crypto market. Whether you are a writer, a trader, or an investor, you will find an option suitable for you. For investors, the industry offers you a chance to expand your investment portfolio. Because the industry is relatively new and technology-based, it is advisable to understand it before starting your investment journey.

If you are thinking of investing in the crypto market, there are specific practices that you must follow to increase your chances of success. This guide explores some of the techniques that investors and traders should adhere to when making their investment decisions. Please, stay tuned.

Follow trends in the market: Avoid FOMO

Previously, many crypto investors have made a killing in the industry. You can quickly regret why you did not do so. And you might find yourself making irrational buying decisions. If you want to succeed in this industry, it is essential to avoid being driven by the fear of missing out (FOMO.) The best practice which can assist you in making wise investment decisions is to explore market trends. Currently, technology has gone a notch higher and can help you on this front. So, you need to invest in helpful platforms like Quantum AI to assist you when trading.

Continue learning

Information is power; therefore, getting more information enables you to have an added advantage. In any business setup, information is essential for the success of that business. By gathering enough information concerning your business, you can make informed decisions that may help propel the company to higher levels.

In cryptocurrency, information helps you to discover new opportunities that may arise in the market. You also stay ahead of the market trends and boost your expertise as an investor. Information can also be classified as part of the experience that you need before trading in crypto exchanges.

Typically, cryptocurrency is technical and can be overwhelming for newbies. As much as you can’t learn everything in a single day, constant learning will bolster your experience. If you are a newbie, then you need more information than anybody else in the market.

Analysing and reading many whitepapers, putting more effort into researching, or reading blogs related to cryptocurrency puts you ahead of the market. You can also ensure that you get constant news on trends to keep you updated on developments in the market.

Have backup cash

It is not wise to have all your eggs in one basket. Like any other business, a calamity can befall your business, and you end up losing a large part of your investment, if not all. A wise business person must always have a backup in cash or assets to get you going in challenging situations.

Cryptocurrency is not any different. However careful you can be, the market can go against your strategies, and you will be at the receiving end. Before this happens, you need to have some backup cash just in case.

Having spare cash is also essential when it comes to seizing opportunities that arise occasionally. Some of these opportunities may get you when you have already invested somewhere else. So if you have extra cash, you can take on those opportunities but wisely.

Note that extra cash can also be your downfall if not wisely invested. Remember, the money is there to help you in difficult times or when a viable opportunity arises. The money should not be confused with extra money after purchasing or making an investment that you can use to do anything. Let business money be business money.

Avoid emotional trading

Cryptocurrency trading can have mixed reactions and feelings depending on the outcomes. The market is very volatile, so you can easily make emotional or rash decisions. Typically, you will experience ups and downs while trading, but what matters is how you will handle the situations.

Let’s focus more on when the market goes against you. What should you do? During this time, your emotions may dictate you to invest more to recover the lost assets. From the frustrations, you are likely to make decisions that will get you out of the market altogether.

The best way to deal with emotions in the crypto business is by accepting the outcomes and calming down for a comeback. Focus more on logical investment and put emotions out of business entirely. One way to overcome the feelings is to have a checklist to help you invest only a given amount of cash.

Rely on research: Avoid pieces of advice

Crypto business is not an ordinary business where you can seek advice from a colleague. It doesn’t matter how long your colleague has been in the business. You should also never advise anyone concerning crypto exchanges. Let’s break it down.

Take a scenario where you have advised someone on some crypto then suddenly drops after buying it. You stand to be blamed for the loss, something that you cannot wish for. So, it would help if you did not share any recommendations or informal investment advice.

Talking generally about the market and the technology and it should end there. Never persuade or influence your friend to buy a coin or other assets.

On the other hand, do not rely on advice from friends before deciding on crypto to buy. The internet is also flooded with dozens of recommendations regarding crypto. Many have fallen victim to such submissions, and you should not be the next one.

To avoid all these dramas, rely on your research and understand what you are doing. This allows you to track your trading history and make informed decisions. Even if you are a newbie, you can get tutorials and learn before investing. It is not possible to invest and gain if you don’t understand the basics of the market, like the difference between a coin and a token.

Avoid margin trading

Leveraged trading has become very popular with many crypto exchanges these days. This allows traders to borrow 3×, 5×, or even 10× times their initial deposit to help them chase more significant gains. Leverage trading is not bad, but things can worsen if you over-leverage and things go against you.

This is a mistake that is common with newbies, especially those who have not faced the wrath of over-leveraging. However, even experienced traders may find themselves repeating the error. We acknowledge that some have gained handsomely from leverage trading, but that should be confused with greed.

Seeing your portfolio going down because of a single mistake that can be avoided is not wise. In simple terms, margin trading may lead to significant gains, but it will only take a single trading mistake, and you lose everything.

Even if you are confident and things seem to go your way, always be prepared for anything. The market has surprised many in the past by going against all odds. You cannot game the market.

Always analyse your mistakes

The cryptocurrency business began a long time ago but has gained fame in recent years. The market is also growing and evolving quickly, so you can easily be left behind. In that case, it is customary to see people making mistakes, and most of them are mistakes you expect even experienced traders to make.

Making a mistake is normal but how you handle the mistake is what matters. To run a successful business, you must learn to analyse your mistakes. After studying the errors, you are also expected to make rational decisions.

It is essential to evaluate how you have fared in a given period in the cryptocurrency market and see how you can improve. This will make you a better trade and increase your earnings. Look at your trading history and note the following;

  • Did you hit your profit targets?
  • See how your portfolio is performing against others in the market
  • Did you stick to your investment plans?
  • What kind of decisions are you making, logical or emotional?

You can book profits

Have you wondered why cryptocurrency trading has gained fame recently despite being in existence for decades? Cryptocurrencies are deflationary, something that counter inflation.

There has been printing of vast sums of money around the world in recent years. With so much money printed, inflation is possible. Consequently, cryptocurrency has no specific timeline, but we know that fiat currency is here to stay.

Given the nature of the currencies, booking profits is the best way to know your gains. Even if you are into cryptocurrency, taking profits will enable you to increase your buying power and balance your portfolio.

Conclusion

Crypto trading is a kind of game that requires patience to get the best out of it. Just like the stock market, emotions and greed have affected crypto investors significantly. However, those who have learned to manage them have beautiful stories to tell. These are the stories that some individuals get and end up getting into the business without understanding it. So don’t fall victim to the market because of mistakes that you can avoid.

The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision.