Disclaimer: This information provided in the blog is for informational purposes only and should not be taken as financial or legal advice. CodeItBro is not responsible for any losses or damages that may result from relying on the information provided in the blog.
Trading crypto reasonably means having control, and not just over your portfolio. Traders who can keep their emotions in check, stick to a plan, and refrain from being influenced by other traders are much more likely to find success when trading.
If you get carried away and are too easily influenced by what other traders are doing, then you’re losing control. This leads to irresponsible trading that can leave you with huge losses when investing in cryptocurrency.
Responsible traders don’t even necessarily stick to low-risk investments. If you research the crypto market and any coins before trading, you can make a long-term profit even with a highly volatile asset. The key is to focus on your path and not pay attention to anyone else.
You’re not a responsible trader if you let impulsive decisions take the lead. Of course, like any skill, this requires both practice and patience. But it’s always possible for anyone to become a responsible crypto trader!
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Table of Contents
6 Tips for Trading Crypto Responsibly
If you want to minimize losses and learn to trade like a pro, look at our top tips for investors who want to trade crypto responsibly!
1. Create a Trading Plan
Creating a trading plan is a crucial step to becoming a responsible trader. With pre-set parameters, you’re less likely to stray and give in to impulsive decisions, setting you up to become a successful trader. Sticking to a plan also trains discipline, so you can make objective decisions that help you in the long term rather than making an emotion-based decision that can result in losses.
Additionally, if you create a long-term plan that you stick to, you can quickly build up practical knowledge about the market. If you don’t have any plan, you will most likely be blindly navigating the crypto market without ever understanding why some of your trades have landed you a profit while others haven’t. You can make a trading diary alongside your plan to keep track of all your trades.
Some questions to ask yourself when creating a personal trading plan:
- What is your motivation for trading?
- What is your short-term and long-term goal?
- How much time are you willing to commit to trading?
- What are the maximum losses you can afford?
- What is your risk tolerance?
- What percentage of your portfolio will be built up of altcoins?
- How can you review your trading performance?
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2. Sign Up for a Crypto Platform
If you’re starting, signing up for a crypto platform is a fantastic way to set off your crypto journey responsibly. A crypto platform is designed to connect traders with well-suited brokers who can offer guidance, support, and tools to help them as they begin investing in cryptocurrency.
If you want extra help choosing a crypto platform, we highly recommend the feature-rich platform Immediate-edge.io. As stated on its official website, Pattern Trader “welcomes individual traders from all walks of life and connects with them the best trading solutions trustworthy brokers offer.”
This platform partners with regulated brokers with plenty of helpful tools, many of which have been designed explicitly with beginner traders in mind. One tool that is especially useful for inexperienced traders is a demonstration account. With a demo account, traders are given dummy funds that they can use to trade on the crypto market.
This can help them learn how the market works and begin to practice the art of trading without the risk of losing any real money. After you’re content with how much you’ve practiced, you can exit the demo account and deposit your funds to start trading crypto. Throughout your investing endeavor, you’ll be supported by a professional broker who will help you to reach your full potential as a responsible trader!
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3. Do Plenty of Research
Before investing in various cryptocurrencies, you must research the crypto market and any particular coins you’re interested in buying. Traders who set time aside to do research are much more responsible than traders who don’t.
Even if you have experience trading other assets, the crypto market is very different. If you dive in without research, you will likely make poor financial decisions. Since the crypto market is volatile and unpredictable, going in blindly can lead to undesired consequences such as significant losses.
Thankfully, the internet is packed with resources that make researching the crypto market a breeze. If you don’t know how to get started, we recommend checking out Investopedia for the latest crypto news, a comprehensive crypto lingo dictionary, and much more!
Additionally, before you buy or trade coins, you should head to the website and social media platform to learn more about the project and the team behind each coin. It’s also wise to read the whitepaper as it explains the coin’s purpose, the team’s goal, and other important information. Finally, it would be best if you headed to an online crypto marketplace such as CoinMarketCap to see the current price of all coins and any relevant metrics.
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Learn How to Diversify Your Portfolio
Although investing all your money into one particular coin may be tempting, having a diversified portfolio is vital to responsible trading. Your best option is to balance your portfolio with a mix of low, medium, and high-risk assets, as you’ll still have a chance to make a significant profit while having a reduced chance of losing all your assets at once.
Altcoins are a popular choice for newer traders as they are typically inexperienced and have a chance of skyrocketing. However, altcoins are considered high-risk investments since they are highly volatile and have an equal chance of plummeting.
On the other hand, well-known coins such as Bitcoin or Ethereum are considered low-risk investments since they are already relatively stable. However, these coins are much more expensive, so you will likely only be able to buy a fraction of them. Although you have a good chance of making a steadily long-term profit, you probably won’t experience any sudden price spikes.
Many traders choose to divide their portfolio, with 70% dedicated to an established coin and 30% dedicated to various altcoins. Of course, this is just one way to balance your portfolio, and you can divide it by 50/50, 60/40, or any other way. You can keep your portfolio stable and balanced as long as you have some form of variety.
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Don’t Fall for Scams
Being aware of crypto scams and learning how to avoid them is another vital part of becoming a responsible trader.
The crypto world is a prime target for scammers; they steal millions in crypto assets yearly from traders.
Even worse, since the crypto market is widely unregulated, these scammers are often never caught and continue to use both new and old methods to deceive traders.
Here is a list of the three most common crypto scams and how to avoid them:
Phishing – This popular scam relies on human error to successfully steal from traders. Typically scammers will masquerade as a legitimate website to persuade traders to input their crypto account information. By tricking traders into giving away sensitive information, scammers can easily steal crypto assets at a mass scale.
To avoid this scam, you should never click any links sent in an email or message, as these can lead to a fake website. Instead, typing the URL directly into your browser would be best. Additionally, it would be best to double-check the URL for any swapped letters or spelling mistakes when using a website that requires you to input your crypto account info.
Dump-and-dump – With a pump-and-dump scam, scammers will generate hype around a particular coin to convince traders to invest in it. As more traders fall for this scam, the coin’s price will inflate, and at this point, the scammers will sell all their holdings.
The coin’s price will then plummet, and scammers will have made a profit while their victims will have lost. To avoid falling for this scam, you must refrain from making impulsive decisions and investing in coins just because other traders are hyping them. If you notice that a coin is suddenly skyrocketing, you should refrain from buying it, as it is likely part of an elaborate pump-and-dump scam.
Giveaways – For this scam, scammers will advertise giveaways on various social media platforms that require a ‘like’ or ‘share’ to enter. They will then message different users, telling them they have won the giveaway and must send a small amount of crypto to claim their reward.
Once the victim has sent the crypto, the scammer will usually block them and disappear with the money. Although this scam is simple, thousands of traders still fall for it. Avoiding this scam is simple – Never send crypto to anyone who asks for it. Most crypto giveaways are scams, especially those that are not posted by verified accounts.
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Regardless of their experience level, many traders will fear missing out (FOMO) at some point during their trading journey. If you notice that other traders are making profits from a particular coin, it can be tempting to start investing your money into it too. However, this emotion-based decision is usually not beneficial. Just because a coin is rising in price and is receiving plenty of attention from traders doesn’t mean it is a good investment decision.
Responsible traders should be able to resist making impulsive decisions based on their FOMO. To avoid FOMO, you should always be aware of rumors or gossip about cryptocurrencies. Also, remember always to research a coin before investing, even if you’re tempted to invest in it instantly. Typically, missing out on a profit is not as bad as experiencing a loss.
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All in all, it’s not that tricky to become a responsible trader, no matter how inexperienced you are. If you remain cautious when trading, do plenty of research, and remember your long-term goals, you can lower your overall risk and have a better chance of making a profit.
Sometimes you will be tempted to make impulsive decisions, but as long as you take control of your emotions, you can resist these temptations. All you need to do is remember to focus on your trading journey, take it slow, and always keep your guard up when it comes to scams, and you’re well on your way to becoming a responsible crypto trader!