This week I began trading cryptocurrency to try and make profit and needless to say it has been an interesting week of quite literally monetary ups and downs. I have been following cypto since March of last year and finally this February I entered into the cryptoworld by investing in BTC and ETH of a total of 2.5K and left it there. But only few weeks later, I spoke to my friends who have been on this crypto journey since the beginning in 2017 and they made it super clear – if your end goal is to make money, invest in ‘altcoins’ alternative cryptocoins or tokens. Wrapping up my first week trading, I wanted to share my gains and losses and a few things I wish I would have known before starting trading.
Don’t invest money you aren’t willing to lose and be prepared for losses
This was a huge mental safety guard for me. The most ideal situation is that you are only trading with money that you earned from profit. However everyone has to start somewhere, right? That being said I started investing with 5K of my hard earned money and it is really tough to lose $500 in a bad bet when you put your hours in at work to attain that.
Don’t invest less than 350USD in anything, it won’t be worth it for short term gains
If you are looking for a quick buck (trading within less than a month. I would really consider trading more than 350 USD for it to be worth it. I’ve made a quick table below of an example of what happened to me today. I invested only 300 in BEPRO but with a miner fee of 55 dollars (on Uniswap) which left with with around 250 to invest in. If I consider the miner fee’s I will have to pay when I pull out, I’m already $100 down on a $300 investment! -33%. Then considering my end goal of making profit the token really has to shoot up to .05c a 50% profit for it to be worth the hassle.
Understand what your taxes are for your crypto capital gains
This is something I had to remind my crypto trading friends. Currently in the US. The government treats crypto gains as they do stock market gains. So you have short and long term capital gains and depending on your federal tax bracket pay accordingly. However after some research not only do you have to taxes on capital gains when you pull your money out of your crypto wallet but you also pay taxes every time you convert coins/tokens. This is big! That means every time I convert my ETH to another coin I’m paying at least 12% in taxes on my capital gains!
So imagine (taking away all of the miner fees) if I had bought ETH for 1K in March and in April it was 2.5K and I put all of that 2.5 in BEPRO, I will have 2.5K in BEPRO however in theory I owe 550 to the government if I am in the 22% federal tax bracket.
Don’t try and catch up to your friends
This seems silly but FOMO is real. I am invested 1K or 500 USD into these coins and they are invested 35K and seeing thousands of dollars in gains. You will get there but first you need to learn how to manage 5K before managing 100K.
Don’t put all your money in the crypto world – diversify.
It sounds really tempting but in my opinion as the crypto world is so new I would still have an emergency fund and also diversify my money to have it still some still in the stock market or ETFs or put money toward your ROTH IRA, whatever you want. I would just be cautious to invest in one thing.
When you find a coin/token decide then and there what your strategy is
This kind of goes with the earlier point of don’t invest less than 350USD. I would have a plan and strategy if you plan on trading short term. I’ve noticed I have had some of my tokens pop and gain however I would stay in for so long the correction would come along and I’m flat in gains. I would assess how strongly you feel about the coin and decide what profit you want to take from it and when is your time to pull out. It saves a lot of stress and energy in the future.
Have any tips of yourself? Have you started your journey on short term investing in crypto? Let me know!
If you want to know how my first week went with a full report on gains and losses. My post to come will be my First Week Trading Crypto – Profits and Losses.