Big Data
18 November

Cryptocurrency trading — How to develop a sustainable strategy

The cryptocurrency space is incredibly popular among investors and traders alike. Many of the most popular crypto assets have grown a lot in recent years. Let’s take Bitcoin. If we look at its growth over the last three years, we will see that its price has increased 13X. The closest Bitcoin’s competitor is just as successful. The Ethereum value has grown from $10 in November 2016 to $190 in November 2019. Cryptocurrencies have made people a lot of money so far. But that’s a long-term perspective, which is usually leveraged by investors. And what about traders?

It is important to trade cryptocurrency as intelligently as possible. If not, you potentially risk losing it all. Most cryptocurrency assets are incredibly volatile, much more so than standard investments. This volatility can lead to both a lot of yield and a lot of loss. Seeing an asset go from increasing by 7% in one day to losing 11% of its value the next is not uncommon.

Thus, be sure to have a sustainable strategy in place for your trading in order to manage your risk. Develop a trading approach that works over time, and won’t leave you broke in a single day.

This blog post highlights a few tips to help you devise and develop a sustainable strategy for cryptocurrency trading.

Trade at a Comfortable Pace


In order to trade sustainably, you need to do it successfully over time without losing everything. One of the best ways is to trade at a pace you are comfortable with.

Some people may trade cryptocurrency daily, but if they do so unsuccessfully, they could lose their entire investment in an instant. It doesn’t sound very sustainable, does it? The market hours for cryptocurrencies are long (24/7 actually), so you have a lot of flexibility when you decide to trade. Find the optimal market times, and trade at a comfortable pace within them.

Use a Stop-Loss at Some Point


When dealing with cryptocurrency, you are bound to experience some loss from time to time. The assets change value frequently throughout the day, often by large amounts. Sometimes this can be in your favor, but that isn’t always the case. As a result, you want to do all you can to reduce the effects of these losses.

One of the best ways to do so is to use stop-losses. A stop-loss is an order to buy or sell your cryptocurrency once it reaches a certain price. This will ensure you never lose too much or experience a massive catastrophe. Where you place the stop-loss will depend on your unique situation and how comfortable you are with risk. Without a stop-loss, there is no saying how much of a hit your investment may take if things go south.

Keep Your Eyes on News Related to the Asset You are Trading


Unlike most types of fiat investments, there are no centralized bodies, financial institutions, or reports that come out to influence the price or value of cryptocurrency. The value is affected by the behavior of traders, and news. A piece of news can often have a large impact on price fluctuation. So you need to keep up with updates relating to whatever type of cryptocurrency you’re trading. If not, you may miss something and miss a good investment opportunity or a chance to sell high. Hacks and bans could hurt the value of a crypto asset, while added support or increasing adoption could help the value.

Now, this isn’t always the case, but you would be doing yourself a disservice if you weren’t following the cryptocurrency news while investing. There are many websites, social media accounts and other types of publications that are certainly worth a follow.

Avoid FOMO and Other Emotion-Based Decisions


One of the best ways to develop a sustainable strategy is to always keep a sound mind when trading. Base your trading decisions on facts and real information, not emotions.

Unfortunately, there has been a lot of hype about cryptocurrency at different times. This has led to many people investing because of FOMO (fear of missing out). Sometimes, this works out. But, there are people who dive in when an asset is at its peak, only to see it crashing back down. As a result, they lose most of their investment in a matter of days.

Don’t start trading simply because something is being talked about a lot, and you don’t want to miss out. Trading based on emotions is quite common but isn’t often fruitful. So, be sure to avoid it if possible.

Only Risk What You Can Afford to Lose


This is important for any type of trading, but especially for cryptocurrency. With how quickly the price can rise and fall, you never truly know what value an asset will carry at the end of a day. Because of this volatility, only risk money that you are okay to lose. If you invest the money you need to afford rent, groceries or other bills, and your investment tanks, you could find yourself in a very dark place. You can lose much more than when dealing with traditional assets, so always be sure to play it safe.
Of course, you should perform your own research on what to trade and ultimately use a strategy you are comfortable with. The more sustainable your strategy is, the longer you will be able to trade, and the better you will likely perform.

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