The cryptocurrency market is the hottest topic of discussion nowadays, especially with Bitcoin on a new bull-run that’s taking the crypto to new heights. The whole thing started with Bitcoin back in 2009 and the market has experienced exponential growth since then. After the crypto winter hit in 2018, many believed that the millionaire-making heyday of cryptocurrencies had passed, but they have been proven wrong. Since the end of 2020, the market has been moving upwards once more and thousands of people have made fortunes. Nonetheless, you should approach crypto trading with caution, says Shay Benhamou.
After all, it is a decentralized market and is highly speculative. The currencies that are traded on the foreign exchange are influenced by centralized governments, global events and economic activity. In contrast, the rules of supply and demand determine the value of cryptocurrencies. Due to the volatility and the security issues associated with the market, Shay Benhamou recommends that you trade cryptocurrencies carefully. Here are some tips that can be helpful in this regard:
As tempting as it might be to go big, you should always begin with a small investment. The cryptocurrency market is unlike any other and even though it is exciting and does have a reputation of generating substantial profits in a short span of time, but there is a huge amount of risk involved as well. In general, these digital currencies are highly volatile and stepping into the market with guns blazing could very well backfire on you. Rather than doing so, experts like Shay Benhamou recommend that you should go with small-stake trades that enable you to understand the market with minimal risk. Of course, the best thing to do is to never trade with more money than you can afford to lose.
The purpose of a wallet is to hold your digital currencies, so it is necessary to select wisely and ensure ease of access and security. There are different types of wallets out there, all with their own functionality and features. If you are just starting out, it might be a good idea to sign up with a reputable broker or exchange and use the wallet they provide. However, in the long run, it is a better idea to get your own wallet because the ones on exchanges could be compromised. You should do some research and find out the difference between hot and cold wallets and then choose accordingly.
The only sure-fire way you can trade cryptocurrencies successfully is if you do your homework and develop an understanding of how the market works. It is definitely not going to be a straightforward process because a lot of practices that are used for evaluating other markets don’t apply to digital assets. Nonetheless, this doesn’t mean that you cannot do anything at all. According to Shay Benhamou, you should be aware of fundamental and technical analysis that will come in handy in the future.
Before you even considering opening a position, you should put some thought into the kind of trader you wish to be. This will mostly depend on the amount of time you can commit to market analysis and trading and how quickly you can turn a profit. You could become a scalper, a day trader or even a passive trader. Swing trading is another alternative you need to consider. Go over each option before you decide what strategy works best for you.
Thanks to leverage, traders can have a much higher stake than what they would through their actual capital. While it does seem appealing and can undoubtedly generate more profits, it can also amplify your losses if the trade moves against you. Shay Benhamou states that the best way to use leverage is to strike a balance between risk and reward. If you are a beginner, you should exercise extreme caution, or avoid it altogether until you have developed a trading style and gotten some confidence. Only those with sound market knowledge should make use of leverage.
Even though this seems rather obvious, you would be surprised to know how many traders don’t really follow this strategy. There is no doubt that Bitcoin is the pioneer cryptocurrency and leads the market, but there are other profitable options that you can opt for as well. Investing in other cryptocurrencies can actually help you hedge your investment. If one crypto falls in value, this can be offset by profits on another. Diversification can also help you maximize your profits when market conditions are favorable, as you can end up holding various assets of high value.
One of the biggest reasons for the downfall of cryptocurrency traders is that they are unable to get a handle on their emotions. The fear of missing out (FOMO) has caused many people to wipe out their entire investment because they were not thinking with a clear head. The cryptocurrency market is a volatile one, so as per Shay Benhamou, dramatic price spikes are considered a norm here, as opposed to the other financial markets out there. It can be quite tempting to jump onto an upward trend because you are afraid that you will miss out, but you have to remember that it can come down just as fast.
If a cryptocurrency has already skyrocketed, chances are that you have missed the ideal spot from where the trend began. The key is to buy low and sell high and if a crypto has already hit its peak, it is best for you to let it go.
Last, but certainly not the least, every expert like Shay Benhamou, will tell you to watch out for scammers because there is no centralized authority or regulation governing the crypto market. Hence, it is a hotbed for scams and you have to be cautious at all times.