When you look for buying a property, stocks or even gold you usually research the market and its potentials. The same follows with cryptocurrency. You will need to do your homework to understand how it works and the risk involves with such investment. As Warren Buffet once stated, “Never Invest in something you don’t understand.”
In this article, we will go through three main factors to remember when buying cryptocurrency. Let’s start!
Do not buy everything at once. Sometimes we get excited about a certain project and think it will moon the next day. However, good things take time to happen. So let assume you want to buy Bitcoin at $6000 and have $2500 to invest. Divide your investment into $500 and buy your bitcoins incrementally. Too big of a position at once could be emotionally hard to deal with. Thus, you will end up taking bad decisions and eventually losing some of your investment value. This method is also applicable when you decide to sell your coins. Sell them at chunks and not at once.
Your biggest aim is to buy low and sell high, it might sound simple but this the toughest part of the game. You should have some background in price trends, supply, and demand. Don’t just dive into the market without having your basics right. Learning technical analysis will always be a big advantage.
Look for projects that interests you
Usually, Bitcoin is referred to the king. But there are tons of other cryptocurrencies that have great projects but don’t get the exposure. Therefore, make sure you research your project and look for the ones that are interesting to you.
I’m pretty sure that a lot of those projects will eventually change and solve some of the challenges in the world we live in. However, make sure that you read reviews and do your research to avoid project scams.
Learn how to take profits
It’s very important to learn to take profits. As they say, the easiest thing in trading cryptocurrency is to buy the coin. However, the hardest thing is actually to sell it. You might end up not making as much as you wished for, but letting your profit grow endlessly will eventually wipe them all.
Bitcoin does not forever rally; this is the same with other cryptocurrencies. Eventually, a market correction will happen which will wipe your profits. As you have seen, Bitcoin has lost about 70% of its value since Dec 2017, and most other cryptocurrencies followed the same pattern.
We have learned important factors that you should consider when buying cryptocurrency:
- Position sizing
- Risk management
- Buy low sell high
- Learn technical analysis: price, trends, supply, and demand
- Research projects
- Take profits
Remember that the tips listed above should not be taken as professional advice but as a friendly one. You should always consult a fiduciary if you want professional advice. I hope that you found the above tips useful and good luck with your future investments!