Top 10 Tips for New Crypto Traders

Learning the top 10 tips for new crypto traders is a smart way to avoid common pitfalls. Trading crypto may seem like an easy task; however, a lot of research, preparation, and skill goes into becoming consistently profitable. As such, there's always room for improvement on any level.

Trading crypto is a great way to get more involved in the market and support projects you believe in. It also helps you improve various skills that can translate into other markets. Here are the top 10 tips every new crypto trader should know.

1. Expect Surprises

The first thing you should know is that the crypto market is unpredictable. New traders often enter the market assuming they have the future figured out. However, the truth is much different, as no one can tell you the market's direction with 100% certainty.

It's common for new traders to enter the sector because someone gave them a tip on a new project that was set to moon. In some occasions, the tip pays off, and you benefit. However, there are other scenarios where the market takes a completely different route and declines.

The best way to prepare for this volatility is to expect it. You don’t want to be that trader who freaks out every hour because they are unsure of their holdings. A better option would be to become a cool-headed, mild-tempered trader who can withstand a storm and remain positive.

2. What's Your Risk Appetite?

The first thing you need to do to prepare for any market volatility is to be honest about your risk appetite. The term ‘risk appetite' refers to the amount of risk you're comfortable with taking on in your strategy. This step requires reflection and honesty.

A common mistake new traders make is exceeding their risk appetite on a trade. This scenario leads to the trader becoming hypersensitive to any market movements. In turn, trading becomes a high-stress activity, often leading to fatigue, frustration, and mistakes.

Keeping within your risk appetite means enjoying more flexibility in market movements. It also enables you to find projects that fit your trading strategy more effectively. Most of all, it will prevent a total loss as savvy traders only trade what they can afford to lose.

3. Avoid FOMO (Fear of Missing Out)

As a new trader, you will have your ears open to a lot of outside influence. Social media is a prime example of how you need to block out the white noise to find the real valuable data. A simple scroll through your timeline reveals many projects, all with heavy promotion.

As a new crypto trader, you will need to be able to determine what projects seem reasonable and what options are just bait. New traders will often fall into traps chasing crazy and unrealistic returns. This misstep is due to a lack of understanding surrounding the technology and progress of a project,

To avoid FOMO, you need to educate yourself. Additionally, you need to build a network of reliable sources to cross-reference potential projects against. The main thing you want to do is avoid falling into echo chambers where the same bad project gets hyped up repeatedly.

The best way to combat FOMO is by creating a network of trustworthy professional users to bounce ideas off. When you have a solid group of like-minded traders to brainstorm with, it's easier to see project shortcomings.

4. Learn About Limit Orders

Another key step that new traders must make is to educate themselves on the different trading options. One of these options that should be in your arsenal is limit orders. A limit order is an order that executes when a certain value is reached.

Limit orders are a great way to lock in a purchase of an asset at a particular price without the need to stare at the market all day. As such, they are a smart way for you to get a good deal on some crypto. The best option is to review the charts to see where the asset was earlier in the week. You can set a limit order to buy or sell at a certain value from there.

A common use of limit orders is to set one to purchase at a low rate and then to set the sale of the same asset with your profit included at a higher rate. If done correctly, you will enjoy a low buy rate and automatically sell as the asset increases in value.

Notably, limit orders aren't guaranteed, and if the market moves too quickly, your limit order may get left unfilled. This unfortunate situation can lead to missed ROIs and other chaos in your strategy. Of course, this scenario is very rare as the market is moving rapidly.

5. Master Stop Loss

The stop-loss function is another tool that new traders must get accustomed to using. This helpful feature enables you to pre-set a sales point for an asset. The goal of a stop loss is simple: to stop losses before they get out of hand.

Stop losses can save you big time and can be set up in a variety of different ways. Some platforms let you set the stop loss based on market price or movements. These options are ideal as they ensure you don’t wake up to massive losses.

Sadly, there are many stories of traders going to bed with a healthy portfolio and waking up busted. Of course, these losses usually occur on new or not established platforms, but they can also occur on large projects, as was the case with the LUNA crash. The importance of setting up stop losses can't be overstated.

The introduction of rolling stop loss is another feature that new traders should master. Like the original stop loss, this feature will automatically sell an asset at a present value. The main difference with a rolling stop loss is that it will automatically raise the sell-off value if the asset's total value increases. This maneuver locks in funds.

6. Study Charting Tools

There are a lot of different charting tools available to traders today. Charting tools help you to catch trends before the rest of the market gets hip to their movements. Notably, charting tools are imperfect, but improving your understanding of them will surely drive higher ROIs.

The best charting tools will enable you to take snapshots of market movements. You can draw directly on the charts from there to help improve your analysis. These platforms should also enable you to alter the time frame from hours to years.

Platforms like Tradingview work across multiple exchanges, enabling anyone to improve their charting skills. These networks leverage real-time data feeds, historical data, indicators, and drawing tools to give you an edge.

7. Delve Into Technical Analysis

Every trader should start to leverage technical analysis whenever possible to improve their consistency. Technical analysis is a term that refers to using a variety of tools to determine future and past market movements. These tools range in their effectiveness and application.

Notably, there is no one-size-fits-all-all in terms of technical analysis tools. Indicators such as MACD, Bollinger bands, and candlesticks make it easier for traders to understand the market momentum from a glance. Today, there are tons of tools at your fingertips to accomplish this task.

Notably, the most effective traders will leverage a combination of indicators to gain a broader overview of the market's potential direction. This strategy is very effective because it's easy to see trends when multiple indicators point to the same results. Additionally, you can use technical indicators for other reasons, such as activating trading bots.

Trading bots are automated programs that can be pre-set to execute trades when certain criteria are met. For example, a trading bot could purchase an asset when its value rises by 10%. As such, bots are a popular tool for expert traders as they eliminate emotion from the equation.

8. Diversify Your Holdings

Another vital tip to improve your trading strategy is to avoid putting all your holdings into one asset. Diversifying your holding is a common phrase often ignored by new traders. In some instances, the new trader has already had their eyes set on a particular asset and cannot see the other options.

Diversifying your holdings is the best way to prevent total losses and buffer negative movements. As such, your portfolio should include a mix of highly reputable platforms such as Bitcoin and Ethereum. It should also have some newer projects that meet your risk appetite.

It's smart not to have all your eggs in one basket, as there have been many times when a platform that seemed very stable collapsed suddenly and without warning. The chances of a project like Bitcoin failing are far less than a new DeFi option, so stack your portfolio accordingly.

9. Learn About Wallets

One of the saddest stories in the crypto market is hearing about someone losing their assets due to hacks. Remember, these individuals often took the time to learn to trade, built up their reserves, and were well into their crypto journey before losing their assets in a hack or error.

Source – Cryptomerchant

As a responsible trader, you need to understand that your crypto's security needs to be your primary concern. Don’t think for a second that there isn't a crowd of nefarious actors plotting on your holdings. Consequently, you must remain vigilant in your security strategy.

You must learn the differences between mobile, desktop, and hardware wallets. You also should understand when to use each and why. A mobile wallet is ideal for daily transactions and anyone needing immediate access to their tokens daily.

A non-custodial software wallet is more secure but offers less flexibility. Finally, a hardware wallet is the most secure option, as these devices keep your crypto in cold storage. This term refers to your coins being stored offline.

Hardware wallets prevent hackers from accessing your crypto in multiple ways. Most have an air gap, meaning your coins are physically disconnected from the internet. Only a person pushing a button will connect them. This approach is highly effective as a hacker can't press a physical button regardless of skill level.

10. Use Multiple Exchanges

Another tip that new trades often overlook is the need to diversify your exchanges. Like your holdings, you don’t want all your eggs in one basket. There are so many different exchanges in operation today; each has its benefits and disadvantages.

Understanding the differences between exchanges can help you gain a competitive advantage. For example, you may know that a certain exchange supports Lightning Network deposits and withdrawals. This feature lowers the cost and time for Bitcoin transactions.

As your skills progress, the features you desire will change. You may soon seek out exchanges that support leverage and margin trading options. These features are geared towards more skilled traders. As such, they provide higher ROI/risk exposure.

You may also leverage a DEX to access hard-to-find coins exclusive to certain networks. Notably, DEXs don’t offer as many services but are non-custodial, potentially making them much more secure than CEXs for advanced traders.

New Crypto Traders Have the Most to Gain

Leveraging the top 10 tips new crypto traders need to know can help to improve your ROIs and confidence. The crypto market provides endless opportunities to those willing to put in the effort to learn its nuances. As such, improving your skills and strategies is worth your time.

You can learn more about exciting blockchain projects here.