Ten Crypto Trading Tips You Need to Know

Crypto offers opportunities for returns that dwarf anything available in the traditional financial sector, and placing the right trades can mean making life-changing money. But that same volatility can easily take away your gains and more if you don’t know what you’re doing. While that can be bad enough at the best of times, days like 12 March 2020 or 19 May 2021, when many cryptos lost around half their value in a matter of hours, can see euphoria turn to dismay and leave traders reeling – and broke.

Check out these ten tips for improving your chances of not only keeping your crypto, but walking away with your profits intact.

Pick your experts carefully

Everyone’s an ‘expert’ in a bull market. When prices are rising, social media influencers start multiplying like flies. They’ll talk a good game, but few have any expertise to back up their predictions. When the market goes against them, you’ll typically find they quietly disappear.

Good analysts are hard to find and seem less popular, partly because they don’t tell people what they want to hear. But they’re worth their weight in gold for helping you keep your feet on the ground when everyone else is losing their heads. A few suggestions include Alessio Rastani, Benjamin Cowen, John Bollinger, and Bob Loukas – but there are many others out there if you look for them.

Watch the moving averages

Learning a few popular chart signals and indicators is well worth your time, and will help you identify trades where risk and return are particularly favourable. Moving averages are a good starting point, because they often define the major moves the market makes. For example, in a crypto bull market, the price will often repeatedly return to the 21-day EMA, while the 21-week EMA tends to be a key support level. The 200-day SMA is, almost by definition, the dividing line between a bull and bear trend. Sites like BabyPips offer free charting courses that can give you a serious edge.

Have a plan

When your portfolio is rising, it’s easy to assume it will keep going up. But if you don’t have a plan to take profits, you could find yourself caught out when the market turns – which it inevitably will, whether in the short or the long term. Set targets – and stick to them – so you can sell at least a percentage of your holdings when you’re winning. Or set stop losses to prevent being exposed to further downside.

Manage risk

Making money is not the same as staying rich. The first is easy, the second – as many people have found out – is not. Ask yourself, what would you do if you woke up and the market had dropped 10, 20, 50%? How can you manage that risk? That might mean scaling out of a position as the market rises, even if you don’t sell everything. Or it might mean diversifying across different cryptos or even asset classes so all your eggs aren’t in one basket.

Trade on a trusted, regulated exchange 

While exchanges are better than they used to be, there’s still risk involved when you trust someone else to look after your crypto. Old-timers call it getting ‘Goxxed’, after the first and largest crypto exchange, MtGox, which collapsed in 2014 taking 650,000 BTC of customers’ money with it. You can reduce that risk to near zero by only using regulated exchanges that take security seriously – Bitstamp, Coinbase, TimeX.io, and a few others.

Use external wallets

If you’re making quick trades, you’ll need to keep your funds on an exchange. (It’s worth noting that the shorter your trading timeframe, the more risky it is – around 80-90% of day traders lose money.) For longer-term trading and investing, learn how to set up a secure crypto wallet that only you control, and withdraw your funds from exchanges.

Get to grips with tax

Tax can eat away at your gains as much as an unexpected market crash. Learn the rules for your jurisdiction, seek advice if you need to, and figure out how to minimise your tax burden. It may not be sexy, but keeping another 20% or more (which can be quite possible depending on your location and specific activities) should be some consolation.

Watch liquidity

The most volatile cryptos – the ones where you can make serious gains, fast – are generally the most thinly traded. That’s because it doesn’t take much money to push the price up when there’s very little of the crypto for sale on an exchange’s order books. But that can be a problem because it can be hard to sell without driving the price back down. Setting limit orders is a better option, but that won’t help if you need to get out of a position in a hurry. Factor in the impact of low liquidity to your risk plan.

Cultivate your inner contrarian

It’s easy to get swept up in the euphoria of a crypto bubble, or the despair of a crash. But as Warren Buffett has said, Be fearful when others are greedy, and greedy when others are fearful. After all, a bubble is the best time to sell and a capitulation event is the best time to buy. If you can read the mood of the market and take the opposite stance, it can often pay well. At the very least, it helps keep your trades grounded in reality.

Park your emotions

On a similar theme, many people trade based on emotion – and the market punishes them for it. FOMOing into a trade is the perfect way to set yourself up for pain. If you can strip the emotion out of your trades and analyse the market dispassionately, you stand a better chance of coming out on top.