7 Crypto Trading Tips for Beginners
Cryptocurrency trading is both risky and intricate, but with the right approach, it can become a substantial source of income.
We’ve compiled some valuable tips and life hacks to assist newcomers in cryptocurrency trading, enabling them to steer clear of financial losses and achieve a stable income from their trades.
Pay attention to liquidity levels
Trading crypto pairs in the futures market involves a dynamic order book, where trading volumes constantly fluctuate. To consistently enter trades at favorable prices, it's crucial to monitor liquidity and trade on exchanges with the highest liquidity. This approach will help you achieve optimal average entry and exit prices for your positions.
Use limit orders
When a trading pair exhibits low liquidity, executing a market order can have a considerable impact on the average price. As a result, this can affect both liquidation prices and potential profits.
Utilizing limit orders can help address this issue. Even if a limit order is not fully executed, it reduces the risk compared to a market order.
Trade in cross margin mode
Engaging in isolated margin trading requires a constant calculation of leverage for each trade. However, traders often refrain from setting stop-loss orders in isolated margin mode and instead, wait for their small position to be liquidated before opening a new one.
A cross margin mode offers more flexibility by utilizing the entire margin account balance and eliminating the need to calculate leverage for individual positions. It also allows you to hold multiple positions simultaneously. For more in-depth information about this trading mode, refer to our dedicated article on futures.
Better no trade than bad RR
RR (Risk-Reward) represents the ratio of potential profit to possible loss for a single position. An optimal RR is considered to be above 3. For example, in such a scenario, closing a position at the stop-loss level results in a loss of approximately 1%, while reaching the take-profit level leads to a profit of 3%.
Traders often use support and resistance zones on the chart to determine their entry point, hoping for a price response. In such cases, it's better to refrain from opening a position if the potential risk-to-reward ratio (RR) is unsatisfactory.
Stops are not a guarantee against losses
If the stop order isn't triggered and the trading pair experiences high volatility, it could result in substantial losses. To safeguard your account balance, it’s advisable not to keep a large sum of money in the margin (or futures) account.
For an optimal approach to opening positions in cross-margin trading, it's sufficient to use funds equivalent to 10% of your total trading balance. This way, you can open trades with a 1% risk without risking excessive losses if the stop price does not trigger.
Stick to your strategy
One or two unsuccessful trades do not necessarily mean that your chosen strategy is ineffective. It's better to analyze your mistakes either monthly or after every 20-30 closed deals, and only then make adjustments to your trading approach.
Frequently changing your strategy will only stack up errors, making it difficult to identify which changes are truly effective and which are not.
Pay attention to trading trends
This is one of the most popular and essential rules in trading. Avoid seeking short positions during an uptrend and long positions during a downtrend. The chances of catching a trend reversal and profiting are quite low, and you may end up with a string of losing trades.
An effective trading approach involves diligently monitoring and analyzing the market, enabling you to make well-informed decisions based on this analysis.
