When starting to invest, there are certain rules you want to keep in mind to help you along the way. The worst thing an investor can do is buy and sell on emotion rather than fundamentals and reason. This is the mistake most new investors make regardless of the instrument being traded. So, here are the 10 investing golden rules for beginners that no one will tell you, until now.
1. Corrections/dips are healthy for any market, especially cryptocurrency.
If prices kept going up, the market would be unsustainable and crash extremely hard. The dips are a great buying opportunity. That’s why it’s extremely important to keep a certain percentage of your portfolio in cash. You never know when a buying opportunity will present itself.
2. During a correction, dollar cost averaging is your best friend.
If you threw all your money in at once, you messed up. Having extra capital to buy any dip or correction increases your portfolio position. This is how people end up owning large quantities of coins or stocks with a solid average buy-in price. Invest small sums as it goes down, just as before, do not throw it all in at once on the way down. This falls in line with rule number one above.
3 Do not invest what you can’t afford to lose.
This one is obvious but some people still don’t understand: DO NOT INVEST MORE MONEY THAN YOU ARE WILLING TO LOSE. Period. Although you invest to earn money, you have to keep in mind that you can also lose money. That’s why dollar cost average is important because what goes down comes up and what goes up comes down.
4. Take some gains along the way.
If you have a 20%~500% gain on an investment and it falls 5%~50%… pound your chest like Matthew McConaughey in The Wolf of Wallstreet and suck it up buttercup, you’re probably still winning. Keep wining by taking some profits of 5-10%. This adds up and keeps you in cash to buy dips.
5. Try to take your original investment off the market.
Taking profit off any investment when you’re up is 100% the smart play. Try to get your original investment back when you’re up and let the rest ride as long as you want it to. You want to trade/invest with profits rather than your principal investment.
6. Markets go in cycles.
We are in a bull cycle. We will be in a bull cycle for a while until we see massive losses and it is clear that the bull cycle is over and we enter a bear cycle. The last bull cycle was in 2017. Right now, we are in a trend (as of writing this) that seems to be slowly going into bear market territory as fed take action towards rate hikes.
7. Diversify your portfolio.
This typically helps decrease your overall losses. Buy multiple projects, so when one is doing well and the other is not, your percentage loss is lower. This one is pivotal.
8. Know your cryptocurrency terminology.
- FUD: Fear, Uncertainty, and Doubt
- FOMO: Fear of Missing Out
- ICO: Initial Coin Offering
- HODL: Hold On for dear Life
- POW: Proof of Work
- POS: Proof of Stake
- ROI: Return on Investment
- WHALE: People who own large amounts of coins and ultimately move the market.
- White Paper: Holds everything you need to know about a project. You should read this before investing in anything long term.
- Bear Market: A market that is going down.
- Bull Market: A market that is going up.
- Paper Hands: Something people with no stomach have. They sell the second the market pulls back.
- Diamond Hands: Something people with an understanding of the market have that don’t make irrational decisions because of fear.
9. Do your own due diligence.
Do not listen to anyone telling you to buy a project unless they give you factual information on said project that you can prove is correct. Do not click on links. Do not send anyone your money. Do not message someone who claims they are a cryptocurrency guru and can handle your investments for you. Avoid these people like the plague. Ignore people who claim they know what the market is going to do. They don’t and they never will. If someone is predicting the market and they know what they are talking about, you will know if they are genuine by how they present themselves. If they don’t have a chart, chances are they are shilling their investments.
10. Last but not least, have fun. Keep Learn. Research.
Find out more about blockchain technology. Find out the differences in coins and if you find something you think is promising then invest in it and be confident about it. Fail. Succeed. Win. Loose. This is how you become a smarter and stronger investor.
This is how you can enter the market in the years to come with more confidence. Do not get wrapped up in the hype and make rational decisions as best you can. News is very important in the world of cryptocurrency.
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