The cryptocurrency market is starting to become a booming market, attracting more and more new investors every day. Different investors have different trading strategies. Some do day trades, while others prefer the long term strategy. If you are deciding on what cryptocurrency to invest on for long term, here are four things that you should consider before making your first trade.
1. Pay attention to market capitalization, not price.
The market capitalization is a way of determining the relative size of a cryptocurrency. It is calculated by multiplying the price of one unit of cryptocurrency to the circulating supply. It is a strong indicator of the demand because it shows how much money has been invested in a specific cryptocurrency. Referring to web pages like CoinMarketCap.com will help you identify which cryptocurrencies are performing well in terms of market capitalization. Generally, the rule of thumb is that regardless of price point, the cryptocurrency with the higher market capitalization will have the greater potential for appreciation in the future.
2. Daily market fluctuations do not matter.
If you are a long term trader, you should not be affected by the daily market fluctuations. Getting into the cryptocurrency market, know that movements of 10-20% in a single day, positive or negative, are normal occurrences. For long term traders, be sure to set your target entry and exit points. Long traders do not aim for the mere 10-20% gains, but instead target the 50-100% gains. Be sure to identify it for yourself before getting into trading because shifting strategies midway could cause problems for you.
3. Many cryptocurrencies will die.
Just because a cryptocurrency is listed on an exchange does not mean that it is there to stay forever. Make sure to do your own research and look for the cryptocurrency with a high potential for growth. Consider all variables like market capitalization, price trend, technical analysis, existing projects and partnerships, and platform. Take note that there are also scam blockchain projects that only aim to get your money and not deliver on its promises. Choose only the legitimate ones by doing diligent research.
4. Diversify wisely.
Do not just diversify for the sake of diversification. You do not diversify just because you do not want to have all your money on one cryptocurrency. Diversify in order to lessen risk and increase gains. While diversifying your portfolio, do as much research on all your choices as you did for your first choice. Diversification without due diligence only hurts your investments in the long run.
If you decide to be a long term investor in cryptocurrencies, remember these four things. While the cryptomarket is still immature as of the moment, investors do not need to be the same.
