You work hard to earn your money and you definitely want your hard-earned money to work for you. Any financial advisor worth their weight in salt will advise you to invest your hard-earned money into a security that is stable.
“Invest in securities that are not volatile”, is the rule of thumb.
The world itself is volatile, along with all in it. Finding a security that is averse to volatility is practically impossible.
To combat this factual reality, diversification is the key.
By scattering your investments around independent investment markets, you are less susceptible to major financial setbacks, if one of your many small investments falls through. Diversification is a much-needed value that needs to be inculcated in investors that dabble in online cryptocurrency trading.
Though your financial advisor may advise against this often-unstable asset class, these moments of volatility in online cryptocurrency trading are viewed as an expected unpredictability by hardened investors.
Diversification in crypto trading is not as straightforward as is in other investment avenues like the stock market. It is like niching down to find a mutual fund that invests mainly in companies that boost agricultural innovation through tech.
So, the million-dollar question is, how do you positively contribute to your financial advisor’s mental wellness while indulging in the upward trend of online crypto trading?
Build A Crypto Trading Portfolio
The answer is to not invest in just one form of cryptocurrency but build a crypto trading portfolio.
With over 5,000 types of cryptocurrencies currently in existence, a crypto trading portfolio is an assortment of cryptocurrencies (including altcoins and other crypto financial products) that you can own.
There are several portfolio trackers that offer online tools as well as software platforms that you can use to analyze your assets and earnings.
Use a Reliable Crypto Trading Platforms or Exchanges
Since online cryptocurrency trading is decentralized in the sense that there is no central exchange or regulator that commands any authority over its operation and it does not rely on intermediaries such as brokerages, exchanges, or banks; there are several exchanges that you can buy crypto from or sell crypto to.
When crypto trading, if the price of the chosen coin fluctuates hurriedly, all the exchanges involved in trading aren’t able to update their prices on the fly. This inability for the various exchanges involved in trading to keep up with each other reveals a variation in price for the same crypto asset at the same moment in time. Trading to take advantage of these price differences across crypto exchanges makes for what is known as arbitrage trading.
Tread With Caution
Keep in mind the fact that managing a diversified portfolio requires more time for research into each of your investments. The larger your portfolio, the more time you have to invest in learning and development to predict the behaviour of your crypto assets for trading competitively.
An over diversification of your portfolio leads to it averaging out which leads to your portfolio behaving exactly like the market does.
What you want to aim for with the diversification of your portfolio is to make a profit on the meticulously chosen investments even when the market shows an overall downturn.
Build Me Up Buttercup
Depending on personal experience with crypto trading strategies or investment in general, your advisor may have a unique point of view but consider these general rules of thumb:
1. There’s one golden investment rule that you should always keep in mind: Never invest money that you can’t afford to lose. If your portfolio is stressing you out, it is your subconscious telling you that the balance is off.
2. As a start, invest in high, medium, and low-risk investments and keep an eye on what works for you. It will help you learn to disinvest from what you are not able to predict accurately. This exercise will lead to a well-researched portfolio.
3. Cryptocurrency trader investments are like riding a cycle. Balance is the key. If one coin has given you returns, you have to fight the urge to dump all of your investments into that asset in the hopes of winning big. Don’t put all your eggs in one basket.
4. Owing to the volatility in the crypto trading platform, past learnings don’t always hold true. As you gain experience in crypto trading, a little flexibility in investing new assets and disinvesting in what is not working for you will only help.
5. Stablecoins possess the unique ability to swiftly and effortlessly latch-in gains or sell at a predetermined value. It offers a promise to quickly liquidate your asset.
6. Never stop learning. Keep reading about your investments and what they are up to while keeping up with the latest happenings in the cryptocurrency trader market. A small piece of information can go a long way to avert disaster.