By Lama Kanj

Forex trading and cryptocurrency trading are seen as very different disciplines. And for good reason– each market has its unique constraints and behaviors. That being said, there are some principles that are universal – they cut across markets and help people make wise decisions no matter what kind of trading they’re doing.

Here’s a look at 7 tips that forex traders are familiar with, and how they apply, and might help, with cryptocurrency trading.

FX Tip: Choose a broker wisely
Applied to Crypto: Choose an exchange (or exchanges) wisely

In trading as in life, having the right access is of paramount importance. A good broker will ensure that you have the foundation required to make wise trading decisions. An unreliable one can invalidate your best moves.

Increasingly, novice cryptocurrency traders are turning to the highest profile exchanges in the market. And for good reason – they typically have better access, security, and in some cases support. With this being said there have been a slew of problems for traders looking to execute trades on both the coins, and the time frame that one is looking for. The solution? Choose an exchange (or exchanges) wisely.

There’s no such thing as too much due diligence here. Choose one that supports a large number of currencies with a high volume of liquidity.

FX Tip: Start by focusing on just one currency pair
Applied to Crypto: Start by focusing on just one cryptocurrency pair

Any Forex advisor worth his salt knows to tell his trainees to start with a single currency pair. The same approach applies to cryptocurrency trading. It will always be tempting to deal with your FOMO by spreading your investment across many different highly promising coins. But having too many irons in the fire can get overwhelming really quickly, especially for early cryptocurrency traders. The rule of thumb is to kick things off with a coin like Bitcoin or Ethereum, since they’re among the most widely traded and highly liquid cryptocurrencies. Branch out once you find your sea legs trading bitcoin.

FX Tip: Keep things simple, trade based on price action
Applied to Crypto: Keep things simple, trade based on price action

When you decide to keep things simple by choosing one cryptocurrency, you will soon find yourself overwhelmed by something else: trading strategies. This, too, can be simplified without compromising on profits. Whenever in doubt, trade based on price action.

What is price action? Quite simply, it is a study of the direction in which a currency is trending based on its recent price movements. The price action trading approach is in contrast to one that relies heavily on technical indicators. Given that cryptocurrency trading is still young and most analysts are figuring things out themselves, it makes sense to make bets based on what you’re able to glean from the recent prices of a coin.

FX Tip: For God’s sake never add to a losing position
Applied to Crypto: For God’s sake never add to a losing position

Too often, forex traders try to salvage a losing position by adding to it. This goes against one of the fundamental tenets of trading: cut losses short and double down on winners.

The same approach applies to cryptocurrency trading. There is often a temptation to continue backing a cryptocurrency that’s trending negatively due to emotional biases or erroneous advice. The truth is most people don’t know with certainty how the price of a cryptocurrency is going to change in the next few days or even hours. So, unless you’re executing a Warren Buffet style strategy which is outside of the scope of this article, never invest more of your money in a currency that’s in the red.

FX Tip: Place stop-losses wisely
Applied to Crypt: Place stop-losses wisely

One way to know when to cut your losses is to have a stop-loss in place. Forex brokers often have traders set a stop-loss order, which is an order that sells a security as soon as it reaches a certain price. This is done so that you stop bleeding money on a security that’s in a bad position.

Given how wildly the prices of bitcoins an altcoins swing regularly, setting a stop-loss becomes trickier. You don’t want to trigger a stop-loss without allowing a cryptocurrency’s value to stabilize after a fall. So make use of stop-loss orders judiciously while trading cryptocurrency.

FX Tip: Pick one trading strategy and run with it
Applied to Crypto: Pick one trading strategy and run with it

Did you find a trading strategy that works? Well then cherish it, and stick with it.

Did you find a trading strategy that doesn’t work? Don’t be too quick to consign it to the trash can.

A lot of young traders have a tendency to promiscuously bounce from one trading strategy to the next. This is a disservice to your efforts especially if you’re a cryptocurrency trader. The market is volatile, making it hard to judge how good a strategy really is.

To simplify things, pick one trading strategy and use it for a while – even if that means taking an L on a few trades. Even the best approaches can yield losses given the right circumstances. Fortunately for traders starting out now, there are platforms on which you can test your forex or cryptocurrency trading strategies even before you try them out in the real world.

FX Tip: Educate yourself before you wreck yourself
Applied to Crypto: Educate yourself before you wreck yourself

At the end of the day, success in trading depends on how much you’re able to learn on the job and away from it. Cryptocurrency trading is young, but it’s also constantly evolving with new tools and platforms constantly entering the ecosystem. It is imperative to have an analytical approach that accounts for new developments. And while it is easy to get overwhelmed by all the information coming your way from external sources and your own experiences, remember to remain patient and have a long-term perspective.

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