Source: first class warehouse
Editor's Note: The original title is "The Four Operations for the Correct Investment in the Encryption Market"
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Abstract: The following are some of the new cryptocurrency traders can follow the practical experience to minimize losses to make a profit.
- Fixed investment, avoiding FOMO (missing fear) and price adjustment
- Invest when the market is relatively stable
- Never invest more than you can afford
- Conduct detailed investigations of projects and tokens as much as possible
With the advent of market legitimacy and regulation, cryptocurrency transactions are becoming easier. However, inexperienced traders may find it difficult to make a profit, and experienced traders have a fundamental understanding of how the market works. As a result, some traders have achieved huge return on investment, but some have fallen short.
We will introduce some basic operating rules that new cryptocurrency traders can follow to minimize losses and make a profit.
Gradually invest a small amount of funds to avoid FOMO and price corrections
There is no emotional place in the cryptocurrency market, including any form of trading. A potential bull market or sudden sell-off often makes uncompetitive traders feel uneasy. When the price rises or falls, investors will react emotionally, they think they have missed a generous return, or have escaped the bursting of the bubble.
The fear of missing led to an artificial increase in the demand for cryptocurrencies and prices, and then traders had to face the inevitable price corrections after the bull market.
Magda Wierzycka, the billionaire of co-founder and CEO of Sygnia Asset Management, recently said that Bitcoin is the largest investment category in her portfolio. Wierzycka invested in a bull market that began in late 2017 and bought Bitcoin for $18,000. The price of Bitcoin fell in the next few weeks, and the market value evaporated by 80%. Stimulated by FOMO, Wierzycka made a wrong decision about the investment in cryptocurrency.
Invest when the market is relatively stable
When to enter the market is crucial. Most investors enter the market when prices are already high or rising. In turn, when prices seem to fall, investors will panic sell. In the long run, planning is the key to profitability, and professional traders and hedge fund managers have mastered this standard.
Such a plan reduces the likelihood of being influenced by emotions and the opportunity to stick to the data available at hand. Helps to curb the impulses generated by short-term forecasts and market speculation. Anthony Pompliano, co-founder of encrypted hedge fund Morgan Creek Digital, emphasized this in an interview, he said.
"We have a target price and predict how long it will take this price. We think it will reach $100,000 in December 2021."
Never invest more than you can afford
As with any form of investment, investors must estimate how much risk they can afford, that is, their investment must be within the limits of their affordability. The cryptocurrency market is relatively unstable and the price volatility is large.
There are many people who enter the market through credit, use mortgages and loans to buy, and finally lose money because of this emotionally driven irrational investment approach. The golden rule of investment also applies to this, that is, to invest within the scope of the loss.
Conduct detailed investigations of projects and tokens as much as possible
Although the times have changed and the market has improved, the cryptocurrency market is still occasionally plagued by scam projects. Traditional markets have benefited from years of regulation and legislation, but the encryption market is new and parliamentarians are still considering regulatory issues. This makes it important to do a detailed investigation before investing.
Pulling high shipments is relatively common. The perpetrators artificially raise the price of tokens, causing demand to rise, triggering a chain reaction that affects other investors. They begin to chase high investment after seeing price increases. Then the perpetrators took the opportunity to sell their tokens and get huge profits at the expense of other investors. Social media platforms and communication channels such as Discord and Telegram are used to attract unsuspecting investors. Once the organizer has invested enough in the plan, they can spend 18 seconds to execute their plan.
It is a very positive step to make cryptocurrency investments easier and easier, but it is important to remember that the market is new and still looking for a foothold. This volatility has the same risks as stock trading, so people should invest cryptocurrency responsibly like other investment categories. As long as the basic principles can guide investment practices, it is possible to obtain high profits, and may even be the key to early profit taking.