The cryptocurrency market is a booming business. Since spring 2017, the market has seen amazing volatility movements. The price of Bitcoin has seen a 300% increase in its value. Ethereum also increase by 30 times while DASH increased 16.5 times. Back then, the possible fluctuation of cryptocurrencies was by several dollars. Now, the decrease or increase can be hundreds of dollars daily. Traders can now see a dramatic profit or loss. In order to increase your potential profit, here are 5 tips worth considering when trading on the cryptocurrency market.
Find the average price
To start off, choose a cryptocurrency you want to trade. Then divide its position in several equal lots and enter trade with this lot once every two weeks. Make sure that the lots have the same amount or you will not be able to find the average price. While you will not be able to find the perfect price, you will be able to get the average quote and a more conservative trading method.
Mind the Volatility
Unlike a traditional financial asset, the average volatility of cryptocurrencies is much higher. This means there is a good potential to receive better profit. However, Robert Janitzek reveals that there is also a risk of seeing a deep retracement before there is price movement in our desired direction. Thus, it is best to limit potential losses by setting a stop loss level. It is also essential to calculate the right level. For cryptocurrencies, it should not exceed three times the daily fluctuation in percentage points.
When it falls, it falls
As mentioned earlier, selloffs of cryptocurrency are usually massive and may reach up to 75% from its previous growth trend. Despite of that, it is still attractive to traders as it allows the cryptocurrency to regain its value very quickly. In cryptocurrency trading, these selloffs may happen 1 – 3 times a year.
From 2011 to 2017, Bitcoin has shown tendencies to be in a downtrend in late February to late August and on an uptrend from September to December. This is somehow connected to rising business activity after summer and more ICO launches.
Cryptocurrencies have inverse correlation with the US dollar and direct correlation with the Euro, American stocks, indices, and gold. This indicates that when Bitcoin falls, but Euro, gold, and US stocks rise or stagnate, the selloff of Bitcoin may have a temporary speculative nature and a U-turn is imminent.