New to cryptocurrencies ? Sept 24, 2017 15:41:02 GMT -6
Post by Imikocha on Sept 24, 2017 15:41:02 GMT -6
New to cryptocurrencies ?
This amazing article was taken from savosgroup.com
When we first discovered cryptocurrencies, we noticed one big common thing across most communities in this market: A lot of investors were either inexperienced with the whole concept of investing or simply had no idea where to start with cryptocurrencies despite having experience with stocks or other types of investments.
We decided to make a small guide on where to start when it comes building your own portfolio. Many concepts are easy to understand and apply on every investment decision you make in order to minimize your exposure as an investor and also maximize your potential for profit. Because you may not be experienced investors, we will make this guide as simple as possible so it is easy to follow and apply.
Concept 1: How much should you invest ?
This is obvious for some, and hard to grasp for others. To make this clear, you should never invest more than what you can afford in any financial instrument, and this includes cryptocurrencies. We don't care about how much you believe in a specific cryptocurrency, exposing yourself to serious financial losses that could put you in trouble (Losing your house, bankruptcy, ruining your credit history etc) is not an option for you, and yes, we see this happening often with novice investors who get too greedy.
So how much should you put in ? First, make a budget, and only allocate to cryptocurrencies what you can afford to lose in order to protect yourself. Simply look at your income, and figure out the best amount that can be suited for investing.
DO NOT, UNDER ANY CIRCUMSTANCES, borrow money to invest. Avoid using credit cards, lines of credit or margins for trading. Sometimes an opportunity seems too good to pass up, but you are better safe than sorry. Save up before you can invest.
Concept 2: Making your choice, how many cryptos to invest into ?
You've been looking at the markets, and have an idea about what to buy. Now the question is, how many cryptos should you get into and what should be the size of your position for each coin ?
Only invest in cryptocurrencies you understand and have done your research on. This market is a paradise for scammers and bad business ideas driven by companies who only care about cashing out the minute they get the investor's money. You should aim to choose the coins with the maximum potential for returns first and then go from there. Do your research about them, the developers, the company behind them, don’t leave any details out. If you buy coin without doing your research, then you are gambling. Gamblers always get burned in the long run.
How do you know the coin you are buying is likely to do well ? (This excludes ICO’s, a different article will cover them).
Here is a basic methodology you can adopt for this process:
Technical Analysis: (Look at the charts, the trends and the patterns, you can easily tell whether the price is headed for an upward or downward progression). If you do not know how to do this, educate yourself on this technique, because it is what differentiates an investor who gambles and one who makes an intelligent decision. We will add documentation on the site so we can point you towards the right direction to learn more about this.
News and Momentum: These are also important factors to consider, news are what boosts momentum, and momentum is what creates a surge in price. You should ask yourself several questions, how many people know about this coin ? How many people are buying this coin ? Are the news good or bad ? Is there something big in the works ? If all the answers to these questions are positive, then you are going in the right direction.
Fundamentals: What this the tech behind the coin ? Is it efficient ? How many other coins are trying to achieve the same purpose ? Is the goal realistic ? Are the people behind it reliable and legitimate ? What is the total supply ? Is it likely to be manipulated or massively dumped ? How many coins do the devs have and are they going to dump them ?
These are all questions you should as yourself before investing in a cryptocurrency. Due diligence is extremely important and plays a huge part in turning your investment into profits. Do not deviate from it, even if it takes a long time. Knowing everything about the coin you are buying is the same thing as visiting a house before buying it, this is what shields you from being screwed and losing your money in the proces. Rome wasn't built in a day, so is your wealth.
Liquidity: A very underrated measure is liquidity (Or volume for those who come from a stock trading background). Liquidity is the ability to turn your investment back into either another cryptocurrency or fiat. You need liquidity in order to sell your coins. If the coin has low volume and you buy a lot of this coin, chances are you won’t be able to sell your coins when the time comes. As a result, you will be buying coins you cannot sell.
Concept 3: Who to trust and not to trust:
This market being a complete lawless jungle made it a perfect field for scammers, pump and dump instigators and criminals of all sorts to conduct their business at ease. This is the price we have to pay for unregulated markets in their infancy stage and this is just one of the many challenges you will have to face as an investor in the cryptocurrency markets.
When making a decision to invest in a coin, simply reading forums and blog news remain a risky endeavor, because you have no idea to determine whether the people writing this content are reliable or not. Popular users could be trying to manipulate you into buying coins that they hold and so on.
The best sources to trust remain:
- News sources (Investing.com and Bloomberg are good starting options).
- Official sources (Developper websites, analysts, etc).
- The developers themselves in social media. (They can be found mostly on Facebook and Twitter).
- Forums (They are good for learning, but biased for investment decision making).
- Newsletters from unknown sources (They are mostly scams fishing for gullible investors).
- Random blogs written by strangers (You don’t know their qualifications nor their true intentions, unless the person has a track record or a very neutral stance, be careful).
We hope this basic guide helps you build a foundation on this market, we intend on writing a lot more content in the future and go much deeper in terms of education material. All our content is free of charge, however, donations are more than welcome.