- Why were so few people interested in buying Bitcoin on 3rd January 2009?
- They were worried about being scammed.
If it sounds risky, man, that’s what it is.
Fast Forward 12 Years
Is it less risky to buy coins now? It depends.
The idea of cryptocurrency is more established now, so the risk of a scam is less if you are buying a stable crypto. All cryptocurrencies have massive short-term price movements, so if you are buying for short-term gains, it is risky. Over the long term, coin prices have increased and will probably continue to do so.
The Statista Bitcoin chart above only shows half the picture because gains through 2021 have doubled the price since January. It is forecast to go as high as $100,000 by December 2021, and up to $200,000 in the near future.
Wouldn’t it be wonderful if Bitcoin prices only ever went up?
But that won’t happen. If you buy at the wrong time, you could still lose money if there is a short-term price crash. Bitcoin prices are notoriously difficult to predict, but some experts reckon you should expect only price rises over the coming months. Others say to get out while you can, before the bubble bursts.
Companies invested in crypto peripherals such as wallets, smart contracts, and trading platforms are all classed as crypto stocks.
Crypto stocks represent crypto for the risk-averse.
Stock markets are regulated, wherever you live. You have little chance of being scammed buying because almost everyone plays by the same rules. When there are bad actors, they are caught and punished.
Companies classed as crypto stocks are subject to the same regulations and oversight as any other publicly listed company.
Finding Good Trading Opportunities
Start your research with a good trading platform service. Most services have a list of top crypto stocks to watch. They analyse where their favoured stocks are going and explain their logic. You get trading graphs and candlestick charts to help you make your own judgements.
Making Your Own Judgements
It’s your money, so you have to educate yourself and make your own judgements. ALWAYS check out any advice for yourself. The best trading platforms will help you with your financial education. They will provide videos and podcasts as well as written resources and reports.
Reducing Your Risk Further
Anyone can go into the market and buy coins or crypto stocks in a few minutes. It is as easy as giving a broker your card details and pressing a few buttons on your screen. Whether you will make money or not is another matter.
Trading without educating yourself is gambling . . . You might be better off putting your money on a horse.
Learning how stock markets work takes time. Learning to read charts takes time. Learning to trade profitably takes time.
Most brokers let you set up a virtual trading account for free. Educate yourself first, but take advantage of a free virtual trading account second. Limit your trading to virtual money until you are consistently making profitable trades.
Seven Simple Rules to Reduce Your Risk to the Minimum
- Always assume your trade will go wrong. Can you afford to lose that amount?
- Have a plan. Decide your risk profile, What percentage of your capital you will use in any one trade, what conditions will make you exit a trade, keep records and analyse your performance.
- Set up automatic take-profit positions. If the stock reaches your target price, sell in case it goes down again.
- Set up automatic stop-loss positions. If your stock price falls you need to sell in case it falls through the floor and wipes you out.
- Trade at least ten stocks. If you do this your end-of-day balance will be less affected if any one stock price crashes.
- Trade across many sectors. That way if bad news comes in that affects one sector, only a fraction of your trades go downhill.
- Always close your trades before the market closes. If you don’t, you could be locked into a stock whose price is in freefall because of bad news that comes in overnight.
Buying crypto stocks may offer less potential for headline-making gains, but done right, it offers less risk of sudden losses caused by factors like celebrity tweets or regulators’ statements.
Trading stocks is easy. Trading stocks profitably is hard. Every trader makes some losing trades. Your target should be to make more profitable trades than loss-making ones.
The secret to trading successfully is putting your time into education and research. However, even the best-educated traders will still lose money unless they are disciplined and follow the principles outlined above.
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