Trading on the cryptocurrency exchange: a plan for a beginner
Entering a financial exchange for the first time can be overwhelming for a novice trader. The desire to earn money induces understandable stress, as decisions need to be made on the trading platform. And, it's no secret that these decisions can lead to losses. It's essential to make informed decisions that minimize risks. Every novice should have a trading plan, an algorithm of sequential actions and pre-calculated scenarios, to lift the burden and move in a clearly defined direction. So, the burning question for many is: how to start trading on the exchange – buying and selling cryptocurrencies? FlyPay outlines the key aspects of trading and common mistakes made by beginner traders.
Excessive Emotionality
People often experience two destructive emotions - fear and greed. Unfortunately, on the trading exchange, these feelings often take control. Novice traders can be divided into two groups based on observations: Those who enter the market later than others, waiting for successful deals and approval. Their distinctive feature is the desire to "get the maximum"; Those who enter the platform at the first opportunity, fearing to miss out on profit. They exit with small amounts, fearing to lose them. They are characterized by a desire to earn small amounts. When developing a trading plan for buying and selling cryptocurrencies, it is essential to consider the goals set by the trader. Many experts suggest conducting technical analysis at the initial stage of trading. However, it will be ineffective due to two reasons: Lack of an objective history for charting; The cryptocurrency market, in general, is not fully developed and explored. It is a new economic sector that is not fully understood even by experienced professionals at its inception. The boundaries and limits are still unclear even to those at the forefront. The cryptocurrency market surprises with new indicators daily. It is impossible to calculate them. Technical analysis is suitable for a balanced and studied financial market. From this perspective, it is clear that there are no right and ideal solutions in the cryptocurrency market. If a novice trader decides to buy and sell cryptocurrency, they should create their own plan considering individual aspects. This minimizes risks while maintaining quality.
Forming a Portfolio
Large investments do not always mean good returns, especially when buying and selling cryptocurrencies. So, a beginner trader faces the choice of which coins to buy today. FlyPay recommends dividing the investment capital into 3 parts, in a percentage ratio - 40-40-20. Now, you can buy the first coin. Avoid purchasing a cryptocurrency that is currently or was recently in an active growth phase. There is a concrete rule: the stronger the impulse, the closer the likelihood of a fall. This axiom applies to any market and instrument. It is not advisable to buy an unknown currency. The chances are that it will remain unknown are high. Trading it will become a roulette game – you might spend more than you gain. In this case, hoping for elusive profit in a few years is not worth it. Before entering the financial market for the first time, a novice can use the arbitrage rule. What does this mean? Compare the growth of several assets and choose where to invest the capital. Suppose the trader selects one coin from the popular "top five" - Bitcoin, Ethereum, Ripple, Bitcoin Cash, Litecoin. It is necessary to compare growth rates for the past year and choose the one that realized its potential the least. At this stage, the novice's task is to protect themselves from the possibility of choosing a moment prone to correction. Moving on – identified the chosen coin, which is Ethereum since it grows slower than the others. It can be purchased with 40% of the capital. It becomes the first position in the portfolio. The second position can be chosen based on the arbitrage rule and market analysis. Now, look at the top 10 coins: select the one that has grown less than the others. For example, Bitcoin Cash. Acquire the coin with the next 40% of the investment capital. Allocate the third part of the capital - 20% - to a cryptocurrency that did not make it into the top 10. Remember, this is your choice and strategy. Therefore, regularly monitor the market and study prospects. Now, the novice has an initial portfolio of three coins. Two coins hold leadership positions, and the third is promising.
Market Monitoring
We've mentioned it several times – a vital part of buying and selling cryptocurrencies is regular market monitoring. Do not rush to buy coins as soon as there is growth, sell when there is a tendency, or cash out. All of this is fraught with failure – lost money. The right decision in the cryptocurrency market is to notice the growth of a coin in the portfolio, sell it, and instantly buy a more attractive position. Manage your coins at your discretion, thereby changing the portfolio view. By following this scheme, a novice trader should form their unique and profitable portfolio. It is one of the parameters of the trading plan – sell the least valuable coin and buy the most promising one. Following this scheme, you can make decisions, just remember to conduct a financial market analysis.
Cash Withdrawal
When to withdraw cash? This question concerns many novice traders. If the process is well-organized, the portfolio will confidently grow. We advocate for the rational use of funds. For example, you can introduce a rule - withdraw 1% of the cryptocurrency portfolio price every month. With this amount, you can purchase regular stocks. However, this is a personal decision for each trader.
