Trading cryptocurrencies is considered a risky investment. And for a good reason; crypto price values fluctuate very wildly, almost unpredictably, exchange fees can add up quickly, and there is also the issue of security.
Even if you think you are a good trader, you still need to have a risk management strategy that will protect you from losses when dealing with cryptos.
In order to help you have as much revenue as possible, we have made a list with some useful risk-minimizing tips for crypto trading:
Know When to Enter and Leave the Market
The most basic common-sense tip for effective trading is to know when to enter the market, and also when you should get out of it. The process of establishing your entry and exit points prior to the execution of any trades is of great importance.
You probably heard by now that in order to make a profit, you have to buy low and sell high. It, seems easy, but what low and high you establish before you enter the trade is the key to your success.
You first would have to study various buy and sell prices over a specific period of time and also take into account other factors that might affect prices, such as market sentiment, partnerships, developments, and other news.
Market trends should be keenly observed. For example, if you see mostly buy orders, you should also probably buy, as this might indicate that people are more willing to hold their crypto instead of selling. The same approach applies to lots of sell offers.
You should also look out for price manipulations, so you don’t end up making orders that have no supporting market sentiment.
Don’t Trade with All Your Money
Putting all your money in trading is not advisable, as you can stand to lose all your savings very quickly should the market go against your trading strategies.
It is wise to allocate a percentage of your capital to crypto trading, and from that amount, you should diversify your assets and trade on multiple exchanges and cryptos.
By executing trades on different exchanges, this minimizes the risk of losing all your funds in a hack.
Practice Good Security Measures
Now that we are on the subject of hacking, we should mention the importance of having good security practices. Hackers are constantly looking for new ways of getting into your account or wallet, being very inventive when it comes to malware, keyloggers, and various phishing strategies.
When you receive new emails from unknown people and certainly don’t click on any weird links or download any materials that might come attached to it. Make sure that your antivirus system is up to date, and always use secure passwords for all accounts.
Before settling on an exchange, you should first thoroughly search the reputation of that company, if it is regulated by a proper financial authority so that in case of theft or hack, you will be restituted in some way. Also, verify if the exchange had any previous hacking incidents and look into how they handled the matter. Check their site’s URLs, which should always start with https and have a green padlock, but usually, most legitimate exchanges have all connections secured.
After you have completed your trading operations, always move your coins from your exchange to an external wallet. This wallet should be secure, and you must keep your private keys and seed phrases stored safely.
Adjust the Right Strategy According to the Market
A good trader must be flexible and adapt to changing market conditions. For example, if there are strong trends, you can capitalize better using swing trading, but when the prices are stable, an automated scalping strategy is more effective.
Limit the Use of Leverage
Margin trading can bring huge profits, as you multiply your order size, and you can adopt long or short positions. But keep in mind that you are practically trading with borrowed money, and you can end up using more money than a regular trade.
If you overuse leverage, you can stand to lose your initial trading sum during forced liquidation. Holding your trade for long periods of time is risky with leverage, as even a price deviation of 1% can leave your account depleted.
As there are some exchanges that offer leverages of x100, you should stick to leverage around x3, as you can still increase your trading gains but have enough wiggle room in case you have to exit a bad trade.
Don’t Give into the Hype
Many traders have made bad decisions driven by fear of missing out. You have to control your emotions even though you see many following the hype. If you sell out of fear, then you might cash out your money at the bottom of a dump.
Media usually trails behind market trends, and often exaggerate the market’s movement. You should be one step ahead of those that only follow the media by relying on the order book and technical analysis.
Now that you have read our tips on how to trade cryptos but keep risks to a minimum, you are ready to start making some money from the cryptocurrency market.
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