Fiat for crypto trading – how much to invest?
New crypto investors and traders are often stuck with one common question- how much money should they put in for crypto trading? Now, first there is no fixed amount. Second, there are multiple factors to consider while you are planning for fiat trading for crypto. The word “fiat trading” in the crypto sphere implies a situation where you will have permission to purchase crypto with fiat money. Not all crypto exchanges allow crypto purchase with fiat- however, the centralized exchanges mostly allow crypto purchase with fiat.
So, getting back to the first question- how much fiat would you actually put in for crypto trading?
Different factors that could influence your investment
No such minimal requirement
One of the best aspects of fiat trading for crypto is that you don’t need to put in a minimal amount. Now, of course, bigger profits depend on bigger trading positions yet you don’t always need to allot a lump sum capital for high profits. It’s because crypto trading usually offers way higher returns compared to traditional trading mediums.
For example, you don’t always need to shell out $1,000 to earn a huge profit in crypto trading. You can start the trade with just $10 as well. In fact, beginner traders are always advised to start the trade with the least amount possible.
How much to put in?
Well, let’s talk about numbers for better clarity on the question.
If you are acquainted with financial tips, you must be aware of the good old 50-30-20 rule. According to the rule, 50% of income should be allotted for necessities and 30% for discretionary spending. The remaining 20% must be allotted to savings.
As per crypto experts, when it comes to crypto trading, you should allot the least amount of money from the remaining 20%. The rule of the thumb is to stick to 5% – a sum of money that won’t cause a ripple in your life if you lose them.
Some of the crypto experts have repeatedly stressed that if you are a beginner, you must not allot more than 1-2%. It’s because you are just crypto-curious at this stage and still don’t know whether you would be putting money in crypto in future as well. So, when you don’t know much about a new area and want to be safe with money, you must keep things small.
But, if you have decided to stay in crypto long-term, then you might increase your investment level above 2%. You might have been trading and investing crypto for quite some time now and have developed clarity about the industry. So, it can be said that you are “crypto-savvy” by now.
However, the maximum you can allot is 5%. Please do not go beyond 5% if you want to keep things under control.
Crypto is wildly volatile
The major reason why experts advise to invest less in crypto trading is the Wild West nature of crypto. Crypto market can shift from up to down in just a few days. Thus, there is always high risk of loss in the crypto market, especially for the new traders. So, if you aspire to be a crypto trader, you have to be prepared that your trade might also end up in loss one day. Now, certainly there are loss management strategies but most importantly, you have to make sure that even if you encounter a loss- it won’t be able to affect your daily life and expenses.
Bottom line is, invest in crypto only if you have spare money. And, make sure to invest small. As mentioned above, crypto trading offers way higher returns in comparison to traditional trading tools. Thus, even if you invest small you will receive a decent return and can also be assured of lesser loss risk.
Factors that influence investment in crypto trading
There is more than one factor that could influence your investment in crypto trading.
The crypto you have planned to invest in would determine how much money you should allot for the crypto trade. If it’s a legacy coin, you should put the maximum investment in that coin. It’s because legacy coins are in high demand in the market, command high trading volume, and are more stable in comparison to other cryptos.
Then, if you are planning to trade meme coins currently, you should not invest as much as you would want to in a legacy coin. It’s because meme coins do not show a sustainable future, So, putting money on them could end up in a loss if you miss out on the right opportunity to trade them in near future.
When do you want to trade?
Are you planning for short-term trading or long-term position trading?
If you are looking for long-term trading or position trading, you do not always need to shell out a huge amount of money. Crypto market is only rising and crypto prices will reach an exponential high. Thus, even if you invest a small amount in the crypto investment and trading sector recently, you would be rewarded with great profits in the long-run.
But, you would need to shell out more than your investment in position crypto trading if you are planning for short-term trading. But, before you put in your money, just make sure that your chosen crypto is predicted to rally up shortly.
Type of trading
You won’t need to invest a lot of money to open a big trading position if you opt for leverage trading in crypto. In leverage trading, your chosen crypto trading platform will offer you money to boost up your personal contribution in crypto investment. For example, if you opt for leverage trading with a whopping sum of $10,000 by investing just $1,000 from your personal share. Crypto exchanges allow traders to choose from a wide range of leverage levels, ranging from 1x to 10x to 50x to even 100x.
Also Read: purchase bitcoin with a bank card
You should also consider the trading fees charged by a crypto exchange while considering an investment for crypto trading.