Cryptocurrency entrepreneurship has become a lucrative and exciting field in the digital age. As the popularity and adoption of cryptocurrencies such as Bitcoin, Ethereum, and Litecoin have rapidly increased, so have the opportunities for individuals to profit from this emerging market.
The world of cryptocurrency can seem scary and overwhelming. With an abundance of coins, exchanges and technical jargon, it can be challenging to know where to start. In this article, we will provide a comprehensive overview of the basics of cryptocurrency, including what it is, how it works, and the essential steps to take when starting your cryptocurrency journey.
Understandthe factors that affect cryptocurrency prices
The main rule of trading and investing in cryptocurrency for beginners is that the price of a cryptocurrency is influenced by many factors. Factors such as the law of supply and demand, and media influence. Law of Supply and Demand Bitcoin’s supply can be compared to gold, as there is a predetermined maximum number of coins that can be put into circulation, similar to how the total amount of gold on Earth is known. The analogies do not end there, because miners must first extract gold from the mines to then bring it to the points of sale; Bitcoin miners (miners) must do the same to create new Bitcoins.
Media influence. Increased media coverage leads to a greater understanding of cryptocurrencies and Bitcoin by the general public. Positive media coverage of Bitcoin will typically increase its price, while negative news about the coin will have the opposite effect on the price of the cryptocurrency. It is also important to note the “crowd effect” that certain news causes in the media. A crypto investor who discovers certain information in the media will quickly share it with his friends, who will do the same. Given the power of social media, news will spread like wildfire, affecting the price of Bitcoin. Therefore, it is necessary to stay up to date with the latest news about Bitcoin and other cryptocurrencies in order not to miss future bullish or bearish waves.
Risk Management In Cryptocurrency Trading
When trading cryptocurrency as a newbie, it is important to manage risk by using stop losses, limiting orders and protecting yourself from fraud. Develop trading strategies that will increase your chances of winning while reducing your chances of losing.
The first step in risk management is to identify potential risks. This can include things like price volatility, fraud and cyber attacks. Each of these risks can lead to significant losses for the trader. Therefore, it is important to do research and assess the risks associated with specific cryptocurrencies before deciding to buy or sell. Once the risks are identified, the trader must develop a risk management plan to help him effectively manage the risks in the trading process.
Three pillars on which risk management stands: Limit transaction risk. The risk amount of a trade is the difference between the purchase price (entry position) and the stop loss level. It is recommended that the risk of one transaction does not exceed 1.5% -2% of the total capital. Limit capital risk. The general rule is that the total risk of all transactions should not exceed 20-25% of capital. This means that if you close all orders at a loss, you should be left with at least 75% of your initial capital. Determining the profitability of a transaction. To compensate for possible losses and generate income, the ratio between income and risk should be 3:1 or 2:1. The income amount is the difference between the entry position and the take profit level (TakeProfit).
Risk management is an important aspect of cryptocurrency trading. Identifying risks, diversifying a portfolio and using stop losses can help a trader reduce risk and protect their capital over the long term. If you want to trade cryptocurrencies, then remember to follow these risk management principles.
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Tips to follow as a beginner
Don’t spend a large amount of money at once
For someone new to cryptocurrencies, it would be a mistake to invest large sums of money in Bitcoin or other cryptocurrencies at once. Cryptocurrency is very volatile – the price can change by ten percent per day. For example, start with $200 instead of buying $1000 worth of cryptocurrency at once. If the price of the cryptocurrency moves in the right direction, buy another $200. Continue to buy more until you have spent the pre-planned amount of money. As a beginner in the crypto market, it is important to start small and gradually increase your exposure to cryptocurrencies. Remember that the crypto market is very volatile and prices can change dramatically.
Maintain mental stop losses
Stop loss – a trade order to limit losses when the price of an asset falls. Bound to a predetermined price
It is always wise to stop losses. “Hard” stop losses are often ineffective because the price of the cryptocurrency fluctuates widely. Instead, use mental stop losses and be disciplined.
An alternative method is “time stop”. Tell yourself that you will sell the cryptocurrency by a certain day, such as Friday. This is an effective way to force yourself to take profits and minimize losses.
Automatic closing of a trade is important not only for clearly identifying risk, but also for closing an order under any conditions, which is very important in online trading.
Use technical analysis
Technical analysis involves analyzing price charts and market data to try to predict future price movements in the cryptocurrency market. Technical analysis allows you to better understand the real situation in the market; it is used to determine the current trend based on the dynamics of the cryptocurrency exchange rate and predict the direction of further dynamics. Using it, the trader will not find the reason for the change in the asset’s exchange rate, but will see the probability of an increase or decrease in the exchange rate. Technical analysis can be used as a hint when to enter or exit a position. For beginners, the two best indicators are moving averages and the RSI / relative strength indicator – an indicator that determines the strength and probability of a trend change. The indicators are clear and give good signals. But don’t use RSI to time your entry.
Diversify your investments
The rule “don’t put all your eggs in one basket” always works everywhere. And this works especially in the crypto market, where the fall of one coin can bring down an entire group of assets. Therefore, you should invest in multiple cryptocurrencies with minimal correlation with each other.
Invest only part of your money in one financial instrument. Buy cryptocurrency but spread the money to invest in other asset classes as well. Some experts recommend keeping 2-3% of the total investment in cryptocurrencies. If this is not possible, make small purchases until you gain more experience and knowledge.
Keep in mind that cryptocurrency trading will not be an easy task for beginners, but if you keep trying, you will succeed.
As with any new venture, starting your cryptocurrency journey can seem daunting at first. But with the right resources and knowledge, you can navigate this complex world and potentially find success. Keep learning, stay informed and don’t be afraid to ask for help along the way. Who knows, you might just become a successful crypto investor and pave the way for others to follow in your footsteps.
In closing
Cryptocurrencies offer many opportunities, but also risks. Crypto trading is not easy for beginners, but if you keep trying and learning, you will succeed. If you pay attention to these points, nothing will stand in the way of your adventure in the world of digital assets.
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Disclaimer for Uncirculars, with a Touch of Personality:
While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
Ultimately, any crypto adventure you embark on is yours alone. We’re just happy to be your crypto companion, cheering you on from the sidelines (and maybe sharing some snacks along the way). So research, explore, and remember, with a little knowledge and a lot of curiosity, you can navigate the crypto cosmos like a pro!
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