The Ultimate Guide To Cryptocurrency Trading And Investing

Becoming a cryptocurrency investor is very appealing, as the allure of significant profits draws everybody in. However, this industry should not be underestimated and requires some thorough research before starting on your trading journey. Otherwise, you may buy the top and never recuperate your investment again. 

The Growing Appeal of Cryptocurrencies

Bitcoin, the world’s leading cryptocurrency, has transitioned from a niche project to a globally viable investment option in 2021. It is a testament to how the perception regarding cryptocurrency has changed in the past decade. 

Although it has taken years to get to this level, institutional investors and regular consumers now have crypto-assets on their radar. Even some of the world’s biggest firms now have a BTC “treasury” to bring value to the company and its stockholders. 

Another telling factor is how banks and financial services providers begin paying attention to Bitcoin as well. With the likes of PayPal and now VISA getting in on the action, the future certainly looks interesting. 

What all of this means for the long-term future of Bitcoin is difficult to determine. Anything is possible in this industry, and [potential] investors need to be aware of everything.

How To Get Started

Diving in blindly is never a smart approach to any financial markets and applies specifically when cryptocurrency is involved. There are thousands of different currencies, tokens, and assets to choose from. Their current high or low price point may seem appealing, but it is only a stepping stone toward educating oneself on what makes these markets tick. 

Educate Yourself Thoroughly

It may seem easy to make money with cryptocurrencies when there is a bull market going on. Buying most assets will net you a profit if you follow the trend. However, the volatile nature of these assets triggers temporary bear markets equally as often. It is often much more difficult for neophyte traders to make money when prices are not “going up only”, even though there are ways to make money from a bear market. 

Getting involved in cryptocurrency trading has a bit of a learning curve. It is not possible to get rich quickly unless you are comfortable with taking extreme trading risks. The slow and steady approach will often work wonders, too but requires an entirely different mindset. Not everyone has the patience to wait years on a significant profit. Decide for yourself whether you want to gamble on price swings or hold-and-forget for the long-term. 

Additionally, traders need to distinguish between projects with long-term value or those that may turn into a scam sooner or later. That latter category is a lot bigger than one may think at first, as a growing number of shady projects hit the market every month. Ponzi schemes such as BitConnect or OneCoin are rare, but they cause permanent damage to this nascent industry. 

Experiment With Trading Strategies

If you are serious about trading cryptocurrencies for profit, having a viable trading strategy is a must. It may seem daunting to put together a method that can make or break your portfolio, but randomly placing orders for different assets isn’t a smart idea. Think before you act, as this industry can be rather unforgiving.

Don’t be afraid to adjust your strategy if it doesn’t perform well either. It makes no sense to stick with a method that has proven unreliable time and time again. Learn from the mistakes and drawbacks and use those as indicators for what not to do in the future. 

Whether you want to learn many indicators or stick to the most basic of toolsets, there is a viable trading strategy that suits your needs. Even then, there is always a chance your portfolio will suffer losses, as financial markets remain largely unpredictable. 

Understand And Embrace Volatility

One of the key hurdles of cryptocurrency trading is the inherent volatility of all markets. While Bitcoin and others can gain 10% in value in a day, these markets can also drop by 20% or more in 24 hours. It creates a very wild ride that can often weigh heavily on one’s psyche, leading to wrong decisions and financial losses.

In this industry, volatility will always be present. Understanding why these trends occur and what is driving them is paramount to become a successful trader. Never get too emotional when the market goes against you, as it can recover a lot quicker than most people realize. 

Take Trading Profits Early And Often

Considering how Bitcoin can rise $1,000 in value in a single day, traders may be inclined to wait for that price target to hit every time. Such steep gains are relatively unlikely to occur often. Taking smaller profits more often and early can help newcomers miss out on some potential gains. Any profit is better than no profit, and it is usually better to miss out on a bit more profit than suffering a loss. 

When taking profit, there is no need to sell all of your holdings at once. It is possible to do so, but only if you expect the long-term uptrend for that asset to be over. Preparing for a potential market is often a smart approach, as these markets can shift direction faster than you can blink.

Find The Right Exchange

Hundreds of cryptocurrency trading platforms exist today, albeit not all of them are worth using. Similar to researching the cryptocurrency markets, traders also need to compare different trading platforms and see which one suits their needs the best. CoinGecko, for example, ranks trading platforms by their cybersecurity score, a factor indicating whether the exchange is secure or not.

Although many people are already aware of the situation, crypto trading platforms tend to get hacked rather regularly. As more of these incidents occur, more money is lost in the process, creating a vicious cycle. Stick with trading platforms that don’t skimp on IT and cybersecurity, as those will often be able to thwart most hacking attempts with relative ease. 

On the same topic, one should not overlook how exchange may handle your privacy. Cryptocurrencies such as Bitcoin and Ethereum are very transparent by default, requiring users to take extra steps to preserve their privacy. Never share access to your exchange account or post screenshots of your traders on social media, as you will attract the wrong type of attention. 

Trading Bots Are An Option But Not Required

It is human nature to do certain things in life as passively as possible while still achieving results. The trading of cryptocurrencies is no different in this regard, as there are plenty of trading bots that claim to make you rich overnight. More often than not, free or cheap trading bots will not generate a profit whatsoever, and it is best to ignore them altogether.

As far as viable trading bots are concerned, they will often come with an upfront cost or a monthly subscription. Some options can prove worthwhile, assuming you can make enough trades to cover the costs and still make a profit on top. Dive into the documentation and reviews of these bots and figure out the cost/reward factor before getting involved, though. 

Most Crypto-assets Are Correlated

It may not seem apparent to newcomers at first, but nearly all cryptocurrency markets are tied to either Bitcoin or Ethereum. If either of these top assets performs well, other markets are likely to follow. However, these top assets may take up the majority of the trading volume leaving alternative markets in an awkward situation.  In such a scenario, altcoins will only move up once either Bitcoin or Ethereum sees its uptrend come to a temporary halt. 

Even then, the correlation between the different markets isn’t always as outspoken. Volatility can do strange things to certain assets, allowing the trend to defy all rationale with no apparent cause. Those moments can prove very difficult to handle for traders, as everything you know or expect may be turned on its head. 

Which Trading Mistakes To Avoid

Getting involved with any industry always carries certain risks that need to be taken into account. There are crucial mistakes for newcomers and advanced traders to avoid, as these can easily trigger portfolio losses otherwise.

Diversify Every Time

It may seem appealing to invest in just one cryptocurrency, such as Bitcoin. Considering BTC’s strong yearly performances to date, such an approach is certainly warranted. However, traders need to obtain a diversified portfolio to spread the risk and increase their chance to score a profit.

In this industry, there are so many different markets that can all bring something to the table. As long as the asset has sufficient liquidity, it is generally safe to invest in the future. Additionally, the correlation mentioned above of crypto assets promotes diversification, as one can tap into multiple potential revenue streams. 

Don’t Swing For The Fences

Over the years, there have been numerous people who take out a mortgage or other loan and dump that entire amount into cryptocurrencies. It may work for the select few who are extremely lucky, but in general, it is safer to keep some money on the side. Never invest more money than you can afford to lose, as these markets can turn against you very quickly.

Leave Emotions At The Door

On paper, it may seem simple to not let your emotions get the better of you when trading cryptocurrencies. As we highlighted in another article, you cannot take the psychological nature and toll of trading regularly lightly. Sooner or later, emotions will begin to cloud your judgment unless you act in these impulses quickly to nip them in the bud. 

Whether the market is bullish or bearish, traders will always have to deal with either euphoria, greed, fear, or panic. Anything and everything can happen when exploring cryptocurrency markets, as their trading behavior is very different from stocks, bonds, or precious metals.

Overtrading Is A Serious Problem

Making money by trading cryptocurrencies can lead to addictive behavior, also known as overtrading. Mainly neophyte traders will always worry about where to squeeze out a profit next, causing them to lose focus and make mistakes.

There is no need to trade every single day for 16 hours. Take regular breaks to reset your psyche and focus on other essential aspects of daily life. Going down the trading rabbit hole is incredibly time-consuming and may not always yield satisfactory results. More traders can lead to more money, but also more fees and other concerns.

Ignore The Hype

Social media may be a godsend to some, but it is an absolute plague when trading cryptocurrencies. Everyone will try to tell you about “the next big thing”, even though the chance of that happening is nearly non-existent. Do not follow advice from others blindly without conducting the necessary research first. 

There are plenty of reasons to be excited about a specific market, but always verify the news, data sources, and so forth. Other traders may manipulate data or information to suit their narrative and attempt to profit from you. Never trust; always verify for yourself. 

Pay Your Taxes On Trading Profits

It may seem appealing to ignore the taxation side of the cryptocurrency trading industry, but that is a recipe for disaster. While most countries may not have enforceable crypto regulation, it is best to pay your taxes on capital gains regardless. If your government doesn’t ban Bitcoin trading, filing with the proper tax authorities is a must. 

Thankfully, there are many taxation tools available to cryptocurrency traders. Most of these will take care of all the aspects on your behalf, making it easier to file taxes. It can also be worthwhile to contact your local tax agency and ask them about the cryptocurrency trading aspect. Avoiding any unwanted surprises regarding taxes is always the smart approach.


Many people are drawn to trading cryptocurrencies in search of gigantic profit potential. However, for every successful trade you make, one or two others may go awry if you are not adequately prepared to deal with these markets. 

The above list of pros and cons is crucial for any trader to remember, regardless of their current and previous market expertise. It may seem easy to begin trading cryptocurrencies, but these markets are not to be taken lightly. One false move and your entire portfolio is at risk. 

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