We all know the old adage of buy low sell high, but there are other things you should take into consideration before entering into Altcoin trading. These tips will save you from many headaches and potential losses.
I have seen many forums, Telegram, Signal, and other chat groups pushing out which altcoin they feel should be bought right now! Usually by the time you read this its already been pumped. The result is you are likely going to be on the wrong side of the dump unless you are really quick. If you follow the below tips when you start trading altcoins you will save yourself some heartache.
Why Are You Trading Altcoin?
In short have a plan before you enter into the purchase of an altcoin. Are you buying because you have done your research and believe in the coin? I would recommend reading the whitepaper of each coin you plan to long-term hold and digging into the team behind it. It is very easy to set up a coin and build a fake team just to swipe peoples money. A recent example is the Confido team, who took all the money they raised and ran. If you plan to invest in an ICO or buy an altcoin on the market, ensure you know what it is and its goals instead of just the hype around it. The altcoin market can be easily manipulated due to its small cap and presence of many large investors (whales). Know why you are buying it and have a plan and you are starting down the road to trading success.
Have a Goal in Mind
When you buy an altcoin have an idea what your goal is. Do you want to ride it to the moon and hodl long-term? Or do you want to make short-term gains off it? If the answer is the latter then you should have an idea at what point you want to sell to make a profit. If you enter without a plan to sell in place you could easily see a profit in the beginning but then lose it because you didn’t know when a good time to sell was. A way to avoid this is once you reach what you consider to be a good profit, set a stop-loss that will sell your altcoin before it drops out of profit. This will lock in your profit and avoid losing everything you gained if the coin drops 70% which can happen in the crypto market very easily.
Examine Your Portfolio
Take a look at your portfolio, do you own 40% or more in altcoins? I would say that is likely moderately risky. My personal recommendation is to have 70-80% of your crypto portfolio invested in bitcoin and the remainder spread out in different altcoins. If you are placing more than that in altcoins you are subject to very volatile swings that could quickly see you with no funds remaining if some of your larger investments tank quickly. Its all about risk management and what you are comfortable losing. Always reevaluate your holdings and adjust when you think you are taking to much risk.
Trade According to Satoshi not Fiat
This is the biggest mistake I see people make when they first start trading altcoins. Since almost all exchanges you are buying altcoins with Bitcoin or Ethereum pairings you need to know what you bought at in Satoshis. Let’s look at what a Satoshi value is for those that may not be aware, as this is of utmost importance to understand.
When you enter into a trade you will be buying or selling your altcoin at a certain point, for example, the below screenshot is of Binance and the altcoin VEN
You can see the buy and sell price underlined for what you will pay in Satoshis for Bitcoin if you buy or receive if you sell. Now this is easy to understand if Bitcoin’s value stayed the same. What happens when Bitcoin rises? You will end up seeing a different value if Bitcoin dips and you are looking only at Fiat value. You will see those same .00003355 being worth less than what you bought it for and same idea with selling. If your end-goal is to acquire Bitcoin then buying and selling should be done according to the Satoshi price and not the Fiat price so you know your actual profit or loss.
A great video that explains this concept in more detail is a must watch!
Buy the Rumor Sell the News
Are you reading about IOTA on CNBC or other large media outlets? It’s likely best to avoid buying in as its too late. You need to be ahead of the mainstream news breakout. Scour the forums, Altcoin specific Telegram, or Discord groups. Get in early but ensure you are researching what is said not just taking what you read as gospel. You want to buy in at the rumor stage before it comes true and make the news as it’s likely already reached its all-time high (ATH) at that point which is never a good time to buy.
Fear of Missing Out (FOMO)
You will hear the term FOMO a lot when you start trading. You will see or hear about a pump happening and want to jump in on the fun. If it has already risen take a step back and ask why it rose so quickly, and if getting involved now is a good idea or if you should wait for a correction of dip. See the above tip if you are reading about it on forums from a large number of people you have likely missed the boat. Don’t worry there are hundreds of other coins out there that will repeat the same cycle. Do yourself a favor and wait and find the next rumor to get involved and avoid buying at a peak during the rush.
Should You Invest in Initial Coin Offerings (ICOs)?
If you just started trading or getting involved in the cryptocurrency space short answer is no. You need to do your research and understand how everything works before you get involved in ICOs as they can be overwhelming and filled with false information. There is plenty of information available on what to look for on ICOs. I am working on my own guide for ICOs that I will publish shortly. If you find that you just can’t wait just remember to read the whitepaper, ask questions on the forums, ensure the development team does exist and has an achievable roadmap.
If this guide helped you at all and you feel like sending over a tip please feel free as its what keeps this site alive.