Cryptocurrency markets are well known for achieving some of the highest ROIs of any tradeable asset ever—easily eclipsing other popular asset classes, including precious metals, bonds, commodities, and most stocks.
However, despite this incredible performance in recent years, a significant proportion of traders still fail to maintain profitability, largely due to basic mistakes that can be easily rectified.
Arguably the most prominent of these mistakes is trading at a platform that doesn’t feature the tools and services necessary to make informed trade decisions and properly hedge against the risks of trading.
With that in mind, using StormGain as an example, let’s examine the key ways traders can minimize risk, and maximize profits in 2019 and beyond.
Know Your Market
Unlike most traditional markets, cryptocurrency markets are largely driven by changes in investor sentiment, which can radically alter the dynamics of supply and demand.
This sentiment can quickly change for a variety of reasons, including breaking news, recent developments in the cryptocurrency industry, and as a result of bullish or bearish chart patterns, such as the infamous Bitcoin death cross, which occurs when the 50-day moving average falls below its 200-day one.
During periods of low sentiment, cryptocurrency markets tend to decline, whereas the opposite is true when investor sentiment improves.
Because of this, successfully using tools that are able to measure and quantify these changes can help traders anticipate where the market is headed.
Simple indicators such as StormGain’s active trade indicator can be used to gain a quick understanding of current market sentiment, and there are numerous additional third-party tools that can be used to make more informed trade choices.
These include alternative.me’s Crypto Fear & Greed Index, as well as Omenics’ ‘SentScore’ indicator.
Take Advantage of Advanced Order Tools
The use of advanced order options is one of the key habits that distinguishes successful traders from those that regularly enter losing positions.
After all, the use of proper stop loss and take profit options can help protect profits and avoid excessive losses, all while limiting the need to manually track open positions.
Unfortunately, it is a common misconception that these more advanced order tools are designed for advanced traders, whereas the truth is they are simply designed to give more control over how the order is executed.
Because of this, many less experienced traders neglect to use them, which leads to failure to successfully exit winning positions, while leaving losing positions open for longer than necessary.
With a market as volatile as the cryptocurrency market, the use of properly organized stop limits can mean the difference between an impressive profit and a gut-wrenching loss.
This is doubly true when trading with leverage, making advanced order controls an absolute necessity for any trader looking to up their game.
Don’t be Afraid to Short
Although it is true that cryptocurrency markets are widely associated with meteoric growth, this certainly isn’t always the case.
After all, throughout much of 2018, Bitcoin and most other crypto assets experienced near-perpetual decline, with most cryptocurrencies experiencing an average loss of almost 80% last year.
Because of this declining market, a large number of traders failed to turn much of a profit last year, since the number of profitable long opportunities was reduced.
However, with the proper use of short orders combined with leverage, it is quite possible to turn a significant profit even during a declining market.
By shorting the market in times of decline and going long during periods of recovery, traders can drastically improve their profitability, while also minimizing their exposure to adverse market conditions.
After all, shorting a 5% decline with 100x leverage can yield 500% profit. Who needs a bull market when trade opportunities like this are commonplace?
Disclaimer: This is a contributed article and should not be taken as investment advice.