- Capitalization – the coin value foundation. Capitalization reflects how investors, large and small companies, powerful mining pools, developer teams and communities, as well as thousands and, sometimes, millions of users — all those who recognize the value of a coin and believe in its growth – support the coin. Large-cap coins tend to follow the market, their rate may temporarily decrease, but thanks to a solid foundation the probability of falling to zero is very low.
- Exchange representation. You can trust in a coin if it is being traded at least on 2 or 3 top platforms. Typically, its rate grows when a coin get listed on each new major exchange.
- Volume. The higher this parameter, the more actively a coin is traded. If the volume is low, roughly speaking, no one needs the coin.
- Max supply. The less number of coins is planned to be issued, the more each one can grow in price. Sometimes developers burn a part of coins to increase the value of the remaining ones.
- Coin price. Inexpensive coins are represented by young developing startups, but their rate may rise (or not) significantly in the future.
- Volatility. Because of rate changes, the trader may earn money. For HODL – Buy and Hold – strategy, high capitalization at a slightly changing rate is suitable. Traders are attracted by the rate jumps due to their ample opportunities for making a profit. But here it is important to correctly determine the entry and exit points.
- The risk/reward ratio refers to the exit point calculation. It helps you to make a long-term profit, even if the individual forecasts are not come to pass. When you guess to what level the coin will grow, look at how much it could fall. To calculate this point, take the minimum rate for the last 6 months or a year if you are very careful. The higher the possible profit-to-loss ratio, the better for you.
Choosing a coin, just check how actively it is discussed in social networks and forums, which large companies are behind it, what’s news and try to figure out what potential benefits it has – whether it offers technologies, approaches, advantages over competitors or ways to neutralize the disadvantages of older solutions. That information will help determine the coin value “here and now” and the price growth potential in the future.