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7 Golden Rules for Crypto Trading


January 27, 2024
Day trading rules, trading crypto, how to trade

Trading cryptocurrencies is a very common thing nowadays. While assets such as Bitcoin are considered a great store of value, it is also a great asset that you can trade. Cryptocurrency trading has become increasingly popular in recent years, and many people are looking to make a profit by buying and selling different digital assets. Cryptos can provide much higher returns, due to their high volatility, compared to traditional investments if you can time the market correctly.

But be careful. By actively trading cryptocurrencies, you run the risk of losing your money to the market. Due to the volatility of cryptocurrency prices, it is not uncommon for traders to lose money quickly or even get liquidated. This is why so many cryptocurrency enthusiasts simply “HODL” their Bitcoin and other cryptocurrencies. Hence, as with any investing or trading, it is important to approach the market with a certain level of caution and strategy. Let’s all face it: We all want to make money by trading, but trading is not easy. It’s hard. It takes a lot of hard work and discipline to master the market.

In this guide, we go over some of the most important rules that will help you to take your trading to the next level!


1. Have a plan and stick to it

The first and most important rule of cryptocurrency trading is to have a plan and stick to it. This means that you should have a clear idea of what you want to achieve and a strategy for how you will achieve it. Having a plan is essential in any trading endeavor, and cryptocurrency trading is no exception. It allows you to set clear goals and objectives and to develop a strategy for achieving them.

Without a plan, you are more likely to make impulsive and emotional decisions, which usually lead to costly mistakes. When creating a trading plan, it’s important to consider your risk tolerance, investment horizon, and financial goals. For example, a buy-and-hold strategy may be more appropriate for you if you have a low-risk tolerance and a long-term investment horizon. On the other hand, a day trading strategy may be more suitable if you have a high-risk tolerance and a short-term investment horizon. In short, the first and most important rule of cryptocurrency trading is to have a plan and stick to it. It lets you set clear goals, plan, and make decisions based on good information.

By sticking to your trading plan, you can improve your chances of success and avoid making mistakes that will cost you money. Having a plan also includes having a strict stop loss and take profit plan. It is important to know when your trade idea is invalidated so you will leave the market. And if the price moves in your favor, you must always have an exit plan.

Many new traders make the mistake of not sticking to their plans. If they see that price is about to hit their stop loss, they might think, “it will go a little lower, but then it surely will go back up,” and they delete the stop loss. Naturally, the price dumps further and further, and the loss is way too big. So remember: Before entering a trade, know your plan and stick to it. Do your technical analysis, identify key areas for stop loss and take profit areas and leave them there. Do not touch them.


2. Use proper risk management

Another important rule is to use proper risk management. This means that you should never lose more than you can afford and always have your risk-to-reward ratio in mind. Additionally, it would be best if you had a liquidation price and a stop loss in place to protect yourself from excessive losses.

Hedging is also a valuable tool for risk management, which can help you to offset potential losses. Proper risk management is crucial for long-term success in cryptocurrency trading. It is essential only to invest what you can afford to lose and to always have a risk-to-reward ratio in mind. This means that for every trade you make, you should clearly understand how much you stand to gain compared to how much you could potentially lose.

To mitigate risk, it is important to know your take profit and a stop loss levels before entering a trade. This will help you to exit a trade and minimize losses if the market moves against you.

Many professional traders never risk more than 1-2% of their trading portfolio on any given trade. That means if their whole trading account is worth $100,000, they will never lose more than $1000-$2000 if a trade turns out to be a losing trade. That way, you limit your drawdowns which will set you back way too far in your trading journey. Protect your capital at all costs.

You can use our free position size calculator tool, to calculate how big your position can be in order to match your risk management rules. That way, you can easily calculate your maximum potential loss and you will never lose more than you should.


3. Ignore FOMO and question FUD

FOMO, or fear of missing out, is a common emotion that many traders experience when they see the market going up. It can be tempting to jump in and buy without thinking, but this is often a recipe for disaster. Instead, you should ignore FOMO and question FUD, or fear, uncertainty, and doubt. This means that you should always be skeptical of news and rumors and only make trades based on solid research and analysis.

Remember: Never chase a rocket, and never try to catch a falling knife.

If the market goes up impulsively and you are not in a position yet, do not try to chase the pump. Go over the chart and come up with an area of interest where you will enter a trade, for example after a pullback happened.

Similarly, you should not try to perfectly time the bottom, as you never know how much lower we can drop. The same rule applies here: Mark up your area of interest and wait for the market to reach it before taking a new trade. If the area of interest does not come into play, do not enter a trade.


4. Dont lose to your emotions

Emotions are your biggest enemy in trading as they lead to irrational and impulsive decisions which you would never take if you were not emotional. This can be anger, fear, pain (mentally or physically), sadness and even happiness. Yes, you got that right: Also being too happy can lead to bad decisions. You may overestimate your skills and take positions that are way too big and you end up losing a ton of money, because you were “feeling lucky today”. This can also happen after a trading big win or a win streak. You might overestimate which then can lead to you being too happy and overconfident. If you are angry or sad, you might “rage trade” without any sense at all.

If you notice any form of emotions coming up inside of you, just take a step back from the charts and reflect if your mind is really capable of making rational and information based decisions. As hard as it sounds: In trading you must execute your plan like a robot. It takes a lot of discipline to admit that in the current moment you might not be able to trade due to your lack of keeping temper.


5. Don’t add to your losers and dont counter trade

Another important rule to keep in mind is to avoid trying to make back losses by counter trading, also known as “adding to your losers.” This is a common mistake made by traders, and it can be extremely tempting to try and make a quick profit by buying more of a coin that has dropped in value.

In theory, you can always add to your losers, similar to the “Martingale” strategy. But this only works if you have an endless amount of funds which makes it an absolutely horrible idea. And more often than not, it will lead to even greater losses. Instead, it’s important to recognize when a trade is not working out, cut your losses, and move on to another opportunity. This discipline is crucial for maintaining a healthy trading strategy and avoiding emotional decisions.


6. Don’t overtrade

Just like overworking, you can overtrade. Like any form of trading, trading in Crypto requires discipline and a strategic approach. One of the key rules of successful trading is to avoid overtrading. Overtrading refers to taking on too many positions, which can lead to emotional trading and ultimately result in financial loss.

When traders engage in overtrading, they dilute their capital allocation and weaken their focus. They may also be more likely to make emotional decisions, which can be a recipe for disaster! The idea behind this strategy is that by limiting the number of trades, traders are more likely to put more time and research into each position to increase the chances of success. By avoiding overtrading and focusing on a small number of high-probability trades, traders can minimize their losses and increase their chances of consistent profitability. Instead of taking as many trades as possible, focus on taking high quality, high probability trades.


7. Don’t focus on too many markets or coins

Finally, it’s important to keep yourself manageable by trying to keep track of too many markets or coins. This can lead to feeling overwhelmed and make it difficult to stay informed about what’s happening in the market. Instead, it’s recommended to focus on a select few coins or assets that you have a good understanding of and can follow easily.


Essential bonus rule

Since Cryptocurrency trading is a highly volatile and dynamic market, it is essential for traders to stay informed about the latest news and developments in order to make informed decisions. One way to do this is by keeping an eye on various economic indicators, such as the Consumer Price Index (CPI), Federal Open Market Committee (FOMC) decisions, and Producer Price Index (PPI). These indicators can provide valuable insights into the economy’s overall state and help traders anticipate market movements and make better trading decisions. You can keep track of all important meetings at Forexfactory here.

The Consumer Price Index (CPI) is a measure of the average change in prices over time for a basket of goods and services consumed by households. It is widely used as an indicator of inflation, and it can provide valuable insights into the overall state of the economy. When the CPI is rising, it generally indicates that inflation is increasing, which can have a positive impact on the value of cryptocurrencies. Conversely, when the CPI is falling, it generally indicates that inflation is decreasing, which can have a negative impact on the value of cryptocurrencies.

Another important factor to keep an eye on is the Federal Open Market Committee (FOMC) decisions. The FOMC is the policy-making body of the Federal Reserve, and it is responsible for setting monetary policy in the United States. The FOMC meets regularly to discuss the state of the economy and to make decisions about interest rates, which can have a significant impact on the value of cryptocurrencies. When the FOMC raises interest rates, it can be seen as a sign of a strong economy, which can be positive for cryptocurrencies. Conversely, when the FOMC lowers interest rates, it can be seen as a sign of a weak economy, which can be negative for cryptocurrencies.

The Producer Price Index (PPI) measures the average change in prices received by domestic producers for their output. It measures the rate of inflation at the wholesale level and can provide valuable insights into the overall state of the economy. When the PPI is rising, it generally indicates that inflation is increasing, which can have a positive impact on the value of cryptocurrencies. Conversely, when the PPI is falling, it generally indicates that inflation is decreasing, which can have a negative impact on the value of cryptocurrencies.



In conclusion, cryptocurrency trading can be a great way to make a profit, but it is important to approach the market with a certain level of caution and strategy. Following these seven golden rules can increase your chances of success and minimize your risk. Remember, have a plan, use proper risk management, ignore FOMO, never get emotional, don’t add to your losers, don’t overtrade, and don’t focus on too many markets or coins. Lastly, staying informed about the latest news and economic developments, including important news events like the CPI, FOMC decisions, and PPI, can be a valuable factor for cryptocurrency traders. By paying attention to these news, traders can gain valuable insights into the overall state of the economy and can anticipate market movements, which can help them to make better trading decisions. However, it’s also important to keep in mind that these indicators are not the only factors to consider when trading, and it is essential to do your own research and analysis to make informed trading decisions.


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