FX.co ★ Altcoins: 6 rules for secure trade

1. Consider the correlation of altcoins with bitcoin

Changes in price of the main cryptocurrency and the majority of altcoins are interrelated, as the money of market players moves from one asset to another. So, when the price of bitcoin grows, traders massively sell altcoins, resulting in a reduction in their price. This is particularly evident in the periods of waiting for the main cryptocurrency forks.

It is commonly observed how several altkoins are simultaneously rushing upwards. But still, when bitcoin moves up, it is necessary to reduce the volume of trade on other coins. Exceptions include cryptocurrencies that show an increased volume of trades, or which have their own fundamental reasons.

2. Diversify

This applies not only to cryptocurrencies, initially this was the main principle while investing in shares and other securities. Diversification will help to reduce risks by dividing capital by different assets. If you increase the number of cryptocurrencies in your investment portfolio, then the overall risk for the total position will drop.

Frequently, altcoins "make a hit" very quickly and unexpectedly. In this case, you need to act very rapidly to not miss the opportunity. Therefore, take care in advance of buying a few coins. They can be profitable from the point of view of technical analysis or there's a lot of talk about them. In any case, possess your mind waiting for updating the maximum values.

3. Limit losses

If the cryptocurrency increases tens of times, then it is extremely difficult not to unleash emotions, and even more so to calculate the risks. Nevertheless, there is a need to do it because of the high volatility of digital assets. With an increased transaction volume, the correction will lead to a significant loss. Before you open a deal, calculate the possible risks not to overstate the volume of positions. In the case of a long-term rate, when price averaging is permitted, set stop-losses and determine for yourself the maximum amount of losses that you can make for a day, a week, and a month.

4. Evaluate the trading conditions

When trading altcoins, do not forget that the coin may not always have the required level of liquidity, capable of maintaining a proper spread. The trading conditions are affected not only by market conditions, but also by a broker through which you trade. In some companies, the average spread on bitcoin is $9, while in others it can reach $60, especially in periods of increased volatility.

5. Fix profit after growth

The first step is your depositing in several different cryptocurrencies. The next step you should take is fixing profit after a strong momentum. In this case, you can close only part of the transaction, leaving 20-30% of the volume in the market. This rule is due to the fact that after the growth there is often a correction of altcoins by more than 30% from the maximum price. In anticipation of the next wave, you can spend a few weeks, so it's better to re-enter the transaction in the future.

6. Do not buy on highs

Of course, the historical records of cryptocurrencies are updated quite often, and therefore the concept of the "maximum price" is very conditional. But despite this, experts advise to guard against euphoria and buy after a rollback, or after consolidation near the previous high and the subsequent level of a breakdown. It is possible that the movement will continue, but will it be easy for you to stay calm while awaiting?

Buying alone from the upper values shows that you are late for the entrance to the market, so you need to be patient waiting for a suitable opportunity to open positions. These rules will help traders avoid major mistakes and save money.