Here are some basic tips and tricks for investing in and trading Bitcoin (and other cryptos). We cover how to avoid fees, what orders to use, and more.
TIP: The tips and tricks below shouldn’t be mistaken as professional investing advice, instead this is basic friendly advice to mull over. If you want professional investment advice, consult a fiduciary.
To keep it simple, let’s just right in to some Bitcoin investing and trading tips and tricks:
Use an exchange, not a broker. You’ll save money on fees. For example, buy and sell with GDAX and not Coinbase.
When you buy/sell via an exchange, try to use limit orders (try not to use market orders). Limit orders generally have the lowest fees, market orders generally have higher fees. On GDAX, limit orders are free as long as they don’t fill immediately (meanwhile, market orders result in a .3% fee, that is better than the 1.4% Coinbase charges, but not as good as 0%… especially if you are day trading).
Figure out if you want to go long or short. Are you going short with every penny you have to invest, or are you going to go long with some and short with some?
If you are going long, consider dollar cost averaging. No better way to avoid making a poorly timed trade than to dollar cost average (buying incrementally instead of all at once and thereby buying an asset at its “average” price over time).
Dad advice: Buy low, sell high. Look at the price trend, if you are at the highest point it has been in the past 24 hours or so, that is inherently more risky. It can make sense to buy as the price starts to break out, but buying after a breakout at a new high while filled with excitement is a little “irrationally exuberant.” This is to say “buy the dips” and “the best time to buy is when there’s blood in the streets… even if it is your own.”
You cannot “buy the dips” if you have all your money to invest already invested. That should be obvious, but consider always having some funds to the side to buy an unforeseen downturn. Even if you want to “go all in” on crypto… leave yourself at least a little money to the side just in case. If you are all in and the price takes a hard downturn, it takes lots of options off the table.
BTC is King/Queen; Don’t Get Overly Optimistic About Altcoins. Those who invest in BTC tend to get itchy fingers when BTC stagnates and alts go up. Sure, going into IOTA or ZCash can be a brilliant move at times… at other times you’ll be holding the bag while everyone moves back into BTC. Stick with coins you know and like, but consider always being partly in BTC (not 24/7, but in general).
Altcoins and Bitcoin often do the opposite of each other (but not always). In other words, it is not rare to see Bitcoin go down while alts go up (and vice versa). This is because everyone who has alts has Bitcoin, so they tend to move out of Bitcoin when it goes down and move into alts. With that said, every once in a while this isn’t true and all coins go up or down together (generally following Bitcoin’s lead).
Consider Diversifying. With that above advice in mind, there is nothing worse than getting frustrated with BTC, moving to ETH and missing a price spike, then moving back into BTC and missing the ETH spike. If you have some of your funds in all the coins you trade, you’ll avoid missing out on a unicorn (a term one can use to describe an odd event, like a giant price spike in a short amount of time).
Hold some coins, range trade some coins, keep money on hand for a dip, and set some high-ball and low-ball orders. If you want to ensure you are happy no matter which direction the winds blow, then be set-up to benefit from whatever comes next. If you have some coins you hold, some coins you trade daily or weekly, some money set aside for a dip, and some high-ball and low-ball orders set… then you stand to benefit regardless of what happens. It can be tempting to cash out
