According to Coinmarketcap, there are more than 6,000 cryptocurrencies being actively traded today! With such a large selection of coins, it’s hard to know where to start if you want to Pick Good Cryptos. But don’t worry! Savvy investors always do their own research before making an investment decision, and now you can follow their lead. Here are some tips on how to pick good cryptocurrencies before investing your money in them.
However, you need to ensure you watch out for these Cryptocurrency scams.
The First Step – Know What They Are
Cryptocurrency is a broad term that encompasses many different assets. The most popular are Bitcoin, Ethereum, and Litecoin, but there are more than 6,000 cryptocurrencies being actively traded today! Understanding exactly what you’re investing in is critical—and knowing how these currencies fit into your portfolio will help maximize gains and minimize risk. Here’s everything you need to know about crypto…
Put Your Eggs in One Basket
When you first start investing in cryptocurrencies, it’s tempting to spread your money around and invest in a wide variety of different coins. While that might seem like a smart move at first, it can be incredibly risky. If you put all your money into one coin, then you’re putting all your eggs in one basket.
If that coin takes a bad turn, all your money will go down with it. In crypto, more than other markets, it’s important to spread out your investments over a number of coins. Otherwise, if one drops, they’ll all drop. That said, don’t get too caught up in thinking about how many cryptos you should own—you don’t need to own hundreds or even dozens of them; three or four is probably enough for most people.
Do Your Due Diligence
What’s your investment timeframe? What are you looking for in a cryptocurrency? Do you want immediate gains or high-risk, high-reward projects? How much do you know about blockchain technology? These are all questions that you should ask yourself before picking a coin. There is no right answer when it comes to selecting which crypto is right for you, but understanding how they work and their basic function will help ensure you don’t lose your money on get-rich-quick schemes.
Once you’ve picked a cryptocurrency, there are other factors you should be aware of. Does it have a working product or service? Who is behind it and what is their track record? How long has it been around? Remember, cryptocurrencies are still in an early phase and there is a good chance that some of your picks will fail.
Learn From Others’ Mistakes
Before you invest in a cryptocurrency, make sure you do your research. Find out which cryptos have already been successful (and which ones haven’t). You don’t want to throw money at an idea that others have deemed a failure. While it might be tempting to take a gamble on a new coin just because it looks cool or has great technology behind it, resists that urge—at least until you know more about what you’re investing in.
One good way to stay informed is by following online forums and social media channels related to cryptocurrencies. There are also plenty of websites dedicated solely to crypto news and information, such as CoinDesk and CoinTelegraph.
Be Realistic About Returns
If you want to experience a real rate of return on your investments, you’ll need to be prepared for some ups and downs. A cryptocurrency that increases from $1,000USD today all the way up to $5,000 by next year would be great—but it wouldn’t be 5x. More likely, it’d end up somewhere between 2x and 3x over that time period. On top of that, most cryptocurrencies are designed with deflation in mind (not inflation).
This means their prices will slowly decrease over time as more people start using them. So if you buy into a currency expecting its value to increase 10% per month and then find yourself taking an 8% loss instead, you’re actually worse off than if you had never bought into it at all! The takeaway: don’t invest in something just because there is hype around it; do your research first!
Use Stop losses/ Take Profits
Picking good cryptos is not easy. All it takes is one bad trade and you could end up losing your shirt. To minimize risk, set stop losses on your trades so that they get liquidated automatically if a coin’s price plummets; or put in place take profits that can liquidate your position once it hits a certain value—like doubling up your investment. For example, say you have $100 worth of Litecoin (LTC) and bought at $50 per LTC.
You set a stop loss for $40 and take a profit for $200 (Litecoin goes from $50 to $200). Once Litecoin hits your stop loss ($40), it gets sold automatically at the market rate ($40). And once it doubles up ($200), then your entire position gets sold off.
Buy at Dips and Sell at Peaks
When people talk about buying and selling cryptocurrencies, they often refer to a coin’s price. But there is another price that you should know about: the price of entry. Once you have found your dream cryptocurrency and started doing research on it, you will have what many people call a cryptocurrency investment plan. The first step in developing a solid plan for your portfolio is knowing when (and when not) to buy into that crypto project. And that’s where we come in. Below are some tips for how to pick good cryptocurrencies at dips and sell at peaks.
Ignore Greed and FOMO
Don’t look at individual cryptocurrencies and try to decide if they’re going up or down. Instead, get a feel for market sentiment in general, then buy into coins that are moving higher over time (commonly known as buy low or buy the dips). Look at their chart; if it looks like an uptrend, then there’s a good chance you can buy in cheap and sell higher when it dips later. The same is true of falling prices: If you see a coin dropping like a rock, consider HODLing (to HODL is to Hold On for Dear Life as the price drops.
HODL is not a Strategy
Hodling (holding on for dear life) is not a strategy. It is simply buying and holding, which can be sound advice for some investors—but not for everyone. If you’re trying to make money from crypto, a buy-and-hold approach is unlikely to get you there. Researching and following an effective crypto investment strategy requires more effort than simply looking at a chart. DYOR: The acronym DYOR means do your own research in crypto-speak.
You should always conduct your own research before investing, but especially when it comes to new coins or tokens. Don’t trust anyone else’s word that a coin will moon or drop; do your own homework first! As Warren Buffett said, Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.
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