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Regardless of your trading experience, it is of no avail, because there is no way to protect one from cryptocurrency price fluctuations. Currently, Bitcoin (Bitcoin) Volatility is a standard measure of daily volatility, with an annualized rate of 64%. In contrast, the same indicator of the S&P 500 index is 17%, while the volatility of WTI crude oil is 54%.
However, by following the five basic rules, the psychological effects of unexpected 25% fluctuations in intraday prices can be avoided. Fortunately, these strategies do not require advanced tools or large sums of money to survive periods of high volatility.
Plan not to withdraw funds in less than 2 years
Suppose you have $5,000 to invest, but it is very likely that you will need at least $2,000 for travel, car repair, or other tasks within 12 months.
The worst thing you can do is to make a 100% allocation in cryptocurrency, because you may need to sell your position at the worst time ever, perhaps at the bottom of the cycle. Even if someone plans to use the proceeds in a decentralized finance (DeFi) pool, there is always a risk of impairment loss or hacking, thereby endangering the use of funds.
In short, any funds allocated to cryptocurrency should have a vesting period of two years.
Always dollar cost average
Even professional traders will be driven out for fear of missing opportunities (FOMO) and forced to establish positions as soon as possible. But if everyone consistently gets a return of 50% or higher, and even memes have excellent returns, how can you stand by?
The DCA strategy includes buying the same amount of US dollars every week or every month, regardless of market trends; for example, buying 200 US dollars every Monday afternoon for a year, eliminating the anxiety and pressure caused by the constant need to decide whether to increase positions.
Avoid buying all positions in less than three or four weeks at all costs. Keep in mind that encryption adoption is still in its infancy.
Don’t use too many indicators when analyzing
There are countless technical indicators, including moving averages, Fibonacci retracements, Bollinger bands, directional movement index, Ichimoku cloud, parabolic steering indicator, relative strength index, and so on. If you think that each has multiple settings, then tracking these metrics is endlessly possible.
The best traders have enough experience to know that reading the market correctly is more important than choosing the best indicators. Some people prefer to track correlations with traditional markets, while others focus on crypto price charts. Apart from trying to track five different indicators at the same time, there is no right or wrong here.
The market is dynamic, and in cryptocurrencies, this is especially true considering the speed of things change.
Learn when to get out
Eventually, you will misread the market when looking for bottoms or altcoin seasons. Every trader sometimes makes mistakes, and there is no need to increase the bet size immediately to make up for the loss. This is exactly the opposite of what people should do.
Whenever you encounter a “bad break,” please put it aside for a few days. The psychological impact of loss is a heavy burden that will negatively affect your ability to think clearly. Even if there is an obvious opportunity, let it slip. Go for a walk, or try to arrange your life outside of trading.
The truly successful trader is not the most talented, but the one who has survived the longest.
Continue to invest in winners
This may be the hardest lesson among them, because investors have a natural tendency to profit from our winning positions. As mentioned earlier, the cryptocurrency market is extremely volatile, so the goal of 30% gain will not make up for your previous (or future) losses.
Traders should not sell winners, but should buy more winners. Of course, market data or overall sentiment should not be ignored, but if your expectations are still bullish, consider increasing your position until the overall market signals some form of weakness.
By bravely holding on to the most profitable position, people will eventually get 300% or 500% of the benefits. These are the rewards you would expect when entering such a high-risk market, so don’t be afraid when they appear.
Every rule is used to break
If there is a roadmap for successful cryptocurrency trading, many people will find it after many years, and the rewards will quickly disappear. This is why you should always be prepared to break your own rules.
Don’t blindly follow the investment advice of influencers or experienced money managers. Everyone has their own risk appetite and the ability to Masukura after unexpected setbacks. But, more importantly, be sure to take care of yourself during this process!
The views and opinions expressed here only represent author It does not necessarily reflect the views of Cointelegraph. Every investment and transaction involves risks. When making a decision, you should conduct your own research.
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