2017 was definitely the year for cryptocurrency growth as the market capital grew from around $15 billion to over $700 billion, as per data from Cryptolization.com. Consequently, trading cryptocurrencies has never been more tempting. Even though trading cryptocurrencies might seem like an investment that can help you make a quick buck, you have to make smart investments, or else the market's astonishingly high volatility can turn your cryptocurrency trading adventure into a dead loss.
To avoid losses and maximize your profits, take into consideration the following advice.
Don't invest what you can't afford to lose
As a rule of thumb, you should only invest what you can afford to lose. Even though you might be tempted by the outstanding bullish market to invest more of your capital, keep in mind that bullish market rallies are usually followed by similar bearish market moves. By far, the cryptocurrency market
exhibits the highest levels of volatility one can encounter across any market all over the globe. Most experienced cryptocurrency traders recommend investing no more than 15% - 20% of your savings in the crypto market.
Don't steer away from the market's news
If you want to start trading cryptocurrencies, you have to learn how to follow the news and charts regularly. The cryptocurrency market moves at a very high pace, so you should regularly follow the charts, news, and the developers' updates regarding the coins your are investing. Keep in mind that the cryptocurrency market is still more or less fueled by hype that can be ignited in forums and the chat rooms of some exchanges. As such, build your knowledge and trading strategies upon news coming from accredited sources, such as the cryptocurrencies' official blogs, GitHub repository updates, and well reputable cryptocurrency news networks, such as Cointelligence.
Don't keep your coins on cryptocurrency exchanges
After you buy a coin on a certain exchange, withdraw it right away to your desktop wallet or hardware wallet. Always remember that if you don't own the private keys of your coins, you don't actually own the coins. No matter how well reputable and legitimate a cryptocurrency exchange might seem, there is always a chance that it can go offline for any reason. As such, withdraw your purchased coins from the exchange and keep them in your desktop or hardware wallet as soon as you purchase them in order to avoid any losses.
Don't invest in a single coin
In order to minimize any losses, don't ever invest all your capital in a single coin. It is beneficial to have a diverse portfolio of coins to minimize losses and increase your chances of making reasonable profits. The volatility of cryptocurrencies is extremely high and the market is subjected to the "dump and pump" schemes. Additionally, price movements are often unpredictable. One strategy is to use your investment capital to buy at least four to five coins that seem profitable to you. This will maximize your profitability and minimize your losses, because as the price of some coins might be dropping, the price of others would usually by rising.
Don't invest too much in ICOs
The past year has witnessed hundreds of ICOs, with many of them turning out to be a big failure, as was seen in the ICOs of Swisscoin, Tezos, Veredictum, and many others. The planners of some ICOs invest big money in ads to lure investors to buy their new tokens and altcoins. They may not have a business plan, other than to put holes in the pockets of investors who decide invest in these ICOs. ICO tokens are even much more volatile than well established cryptocurrencies, so always invest in these with caution.