In this blog post, we will go over 5 basic rules when it comes to trading cryptocurrencies.

If you have considered trading cryptocurrencies (or any other financial trading) and you want to start you should always follow the first and most important rule of all!

Rule #1: Never invest or trade money that you cannot afford to lose

You should know how important that rule is. Especially in cryptocurrency trading where losses are not only made when the market is declining, but you can lose your entire investment by simply misplacing one letter or a number when withdrawing your funds or sending it to another exchange or wallet. Be sure to only invest or trade funds that you can afford to lose!

Rule #2: Don’t FOMO

You might have heard about FOMO in the past. FOMO is an abbreviation for “fear of missing out”.

We all have seen random cryptocurrencies making very large gains in value in a short period of time. Sometimes even hours. Note, that this is not the time to jump in and buy that cryptocurrency. Those large gains are usually the result of pumping the coin/token by some whales or crypto influencers and they will be very happy to sell you the amount at the high price that they bought earlier for a much lower price.

Trading is all about controlling your emotions. Once everyone is hyped it might be too late to get any significant gains or as Warren Buffett once said: “be fearful when others are greedy, and greedy when others are fearful.”

Rule #3: Money management

This will make a difference between success or failure in trading. Of course, we all want to buy low and sell high. But this is not as easy as it sounds. Note that 80% of traders end up losing their money. In most cases, this is due to emotions and that is why money management is so important.

Start small. Never put more than 5% of your trading funds into one trade. Place multiple orders and do not buy all at once. Start by placing limit orders at 3%, 5%, and 10% below the current price. Write down your entry prices and sell prices. Make notes for each trade and learn from your mistakes.

Remember, no one wins every single trade. Do not let the losses get the better of you. The losses will make you a better trader if you choose to learn from them.

Rule #4: Charts & technical analysis

If you want to be a successful trader you should really invest some time in learning the basics about reading charts, different trading interfaces, and technical analysis (TA).

Cryptocurrency markets are relatively new and you cannot really do any fundamental analysis on any asset. That is why reading the charts and making a technical analysis is very important.

Charts will provide you with numerically-heavy data in the form of a simple visual.

We will go into more details about TA in another blog post. Until then, you should start learning about moving averages, RSI, trend lines, upwards and downwards channels, bull flags, etc.

Rule #5: Take Profits

Profits are always better than losses, right? When your trading asset is starting to increase in value take some profits. You should not be greedy. Even if you are expecting a 20 to 30% increase in value you should take some profits at 10%. Cryptocurrency markets are highly volatile and the value of your trading assets can drop to your entry price or even lower very quickly.  You cannot lose money by taking in some profits but holding an open position for a long period of time or trying to sell your asset at a higher price can lead to a loss (if the market goes down) and no one wants to lose the profits they already earned. Perceived loss is sometimes even more painful than the actual loss. Keep this in mind.

If you want to discuss trading and investing in cryptocurrencies join our official Reddit or join our Discord server. Read more about cryptocurrencies in my guide here.