World is going to be digitalize day by day and modern technologies are introducing everyday. Cryptocurrency is one of them on the top and many investors are looking for it to make profit on its White-hot rise.
Some cryptos such as Bitcoin and Ethereum ebb for a while but after that they climb higher in rate. Many other popular currencies are doing same.
Many experienced traders are working on it from many years but what if you are new and want to learn rules to invest in crypto currency then this blog will help you to know how to invest in cryptocurrency.
5 Major Steps for Start Investing in Cryptocurrency
If you are thinking to start investing in crypto then you need to have all your finances in order. Mainly you have an emergency fund in place and manageable level of debt and a diversified portfolio of investment. Your crypto investment can become one more part of your portfolio and it helps in rise of your total returns hopefully.
These are the five major steps you should know before starting to invest in crypto currencies.
1) Understanding your currency in which you are investing:
Before investing in some currency you have to research that currency in which you are interested to invest. If you are buying some stocks than the first thing is to know the background history, prospectus and experts analysis of that company thoroughly. You have to do same with those cryptocurrencies as thousands of currencies are present and many new one are generating everyday and before investing in that currency you need to understand the each trade.
Many crypto assets rely on the market to become more optimistic for you to profit. Many crypto currencies are backed by nothing at all, neither hard assets or cash flow where investors always rely on someone paying more for the asset then they pay for it.
There are many famous coins available in the market include Ethereum, Dogecoin, Cardano and XRP. So before you invest in one of them you have to understand the potential upside and downside. It could be end up being worth nothing if your financial investment is not backed by an asset or cash flow.
2) Always Remember, that past is Past
Many investors make a mistake for looking at the past and think that it remains same in future or present. As in case of Bitcoin, in past it worth were in pennies but now its worth is much more so never rely on the past. So there always come questions here that “will the growth continue in the future even if it’s not at quite that meteoric rate”?
Always remember that investors look to the future not to the past that what an asset has done in the past. As traders buying a cryptocurrency today needs for tomorrows gain not for the yesterdays.
3) Volatility of the Currency:
The volatility of a cryptocurrency is same like an asset. They could drop quickly within seconds due so spread of some rumor based on baseless thing. Volatility is a game for high powered Wall Street traders each of them is trying to overcome on other deep pocketed investors. A new investor can easily be a prey for such traders and easily get crushed by the volatility. This is because beginners get scared and volatility shakes out such traders.
Some traders step in by buy on cheap and for them, volatility help such sophisticated traders which buy at low but sell at high level. While on the other hand inexperienced investors buy at high level but sell at low level.
4) Manage your risk:
If you are trading on some short basis for some assets you need to manage your risk and that could be especially true with volatile assets such as cryptocurrecy. So as a new trader you need to manage the risk and develop a process to prevent from losses. These processes can vary from individual to individual:
- Risk management for a long term investors might simply be never selling regardless of the price as they allow the investors to stick with the positions.
- While in short term trader there might be some strict rules to sell such as commission of 10 percent fallen from the investment. So that the trader follows the rule to crushing the loss.
For new traders they always need to use only a portion of trading money instead of using all money at least at first. If unfortunately a position moves against them they still have money in reserve for later use. It’s a good option as you don’t trade if you don’t have any money. So keeping a backup is good for investment.
Selling a losing portion hurts but doing so it helps you to avoid from worse losses happening in future. So it is important to manage your risk.
5) Don’t invest more than you can afford to lose
It is important to avoid investing money on some speculative assets. If you can’t afford to lose it all than you can’t afford to risk it in some risky assets such as cryptocurrency or other market based assets such as stocks or ETFs.
Never invest your money that you have to need in coming a few years such as down payment of your house or any other important purchase’s money it should be kept in safe in some account so you can use it when need it as it is the absolutely sure return in that case. But in crypto you are stuck for a long time and there is no surety. If you are looking for an absolutely sure return then the best option is to pay off the debt you can’t lose there.
Finally try to invest in crypto wallets as it holds coins offline and they are inaccessible to hackers or others. So don’t overlook the security of any exchange or broker you’re using you may own your assets legally but you have to secure them and their security need to be tight.
