Cryptocurrencies: the 5 tips you have to apply to start the year on the right foot

Cryptocurrencies future

No matter the experience you have in trading because you can not do anything to protect an individual against the power of price changes of cryptocurrencies.

However, it is possible to avoid the psychological impact of an unexpected 25% intraday price swing by following five basic rules. Fortunately, these tactics do not require advanced tools or large sums of money to sustain during periods of high volatility.

The 5 tips you have to apply to start the year on the right foot

1. Plan not to withdraw money for less than 2 years

Let’s say you have $5,000 to invest, but there’s a good chance you’ll need at least $2,000 of that amount within 12 months for travel or car maintenance or some other task.

The worst thing you can do is make a 100% crypto allocation because you may need to sell your position at the worst time ever, perhaps at the bottom of the cycle. Even if one plans to use the proceeds in decentralized finance pools (DeFi), there is always the risk of impairment losses or attacks that compromise access to funds.

In short, the funds allocated to cryptocurrencies must have a vesting period of 2 years.

2. Average cost in usual dollars

Even professional traders get carried away by the fear of missing something (FOMO), giving in to the urge to build a position as quickly as possible. But, if everyone is consistently making returns of 50% or more and even meme coins are posting stellar returns, how can you step aside and just watch?

The DCA strategy consists of buying the same dollar amount every week or month regardless of market movements, for example, buying $200 every Monday afternoon for a year and eliminates the anxiety and pressure caused by the constant need to decide whether to add a position.

Avoid buying all positions in less than 3-4 weeks at all costs. Remember, the crypto adoption rate is still in its infancy.

3. Don’t use too many indicators when conducting analysis

There are countless technical indicators, including the Moving Average, Fibonacci Retracement Levels, Bollinger Bands, Directional Movement Index, Ichimoku Cloud, Parabolic SAR, Relative Strength Index, and more. If you consider that each one has multiple settings, there are endless possibilities for tracking those indicators.

The best traders are experienced enough to know that reading the market correctly is more important than choosing the best indicator. Some prefer to track correlations with traditional markets, while others focus exclusively on cryptocurrency price charts. There is nothing right or wrong here except for trying to track 5 different indicators simultaneously.

Markets are dynamic, and in the crypto space, that’s especially true considering how quickly things change.

4. Learn when to step aside

Eventually, you will misread the market while finding altcoin floors or seasons. All traders make mistakes sometimes and there is no need to compensate by immediately increasing the bet size to recoup losses. That is precisely the opposite of what one should be doing.

Whenever you have a “bad rest”, step aside for a couple of days. The psychological impact of losses is a heavy burden and will negatively affect your ability to think clearly. Even if a clear opportunity arises, let it pass. Go for a walk or try to organize your life in addition to business.

The truly successful traders are not the most gifted, but the ones who survive the longest.

5. Continue to invest in winners

This could be the hardest lesson of all because investors have a natural tendency to profit from our winning positions. As mentioned above, the volatility of the cryptocurrency market is extremely high, so aiming for a 30% profit will not cover your past (or future) losses.

Instead of selling winners, traders should buy more of them. Of course, one should not neglect market data or general sentiment, but if your expectations remain bullish, consider adding to the position until the general market indicates some kind of weakness.

You will eventually make a profit of 300% or 500% if you are brave and stick with the most profitable positions. These are the returns you expected when entering such a risky market, so don’t be afraid when they show up.