When it comes to trading, there are several steps you can take in order to reduce your exposure to the market extremes of price volatility.
A combination of both technical and fundamental analysis can be used to determine thetrue worth of a company or asset, securing a greater chance of success with a particular investment while reducing your risk along the way.
But for that, you need a plan.
Developing a successful risk management plan is paramount in minimizing unexpected outcomes, translating into an overall reduction in your losses.
A successful risk management plan should also run parallel to your crypto trading journal records, working in conjunction to curb poor trading behavior while simultaneously justifying your fundamental expectations.
Sometimes temptation leads to poor choices and it is no more on display than a market driven by fear and greed.
By reducing harmful or negative trading habits, one can hope to increase profit without putting too much on the table.
A key component of a successful risk management plan is determining what kind of trader you are and where your skills currently lie:
From these personas you can draw a rough idea on where you currently sit in terms of your trading mentality. The idea is to identify what habits are forcing you to lose out and which habits are guiding you to profit.
Try to remain stoic and reasoned, removing emotion from the psychological aspect of trading while relying solely on the information in front of you such as the price, volume, news and trend.
No matter how tempting or promising a particular trade opportunity may appear it is never a good idea to place all of your worth on the line.
Generally, a spread of one particular type of asset class (as well as a generous mix of different asset classes within your portfolio) is an ample measure in reducing your exposure to larger price moves within a particular industry/market.
The volatility of the cryptocurrency market means that any trade, even a seemingly perfect trade, can collapse and result in a significant loss. Therefore, it is recommended that you start investing in 5 or more different coins.
Also remember to take advantage of an exchanges stop-loss feature and use it to your benefit when you are away from trading manually such as times of rest or at work.
Time and again new traders fail to incorporate an adequate exit strategy, often arriving back at their computer to find their beloved basket of crypto have dropped 20 percent and a new trend has developed to the downside. This act not only reduces your risk but allows for greater control over your losses.
Finally, it can be tempting to use a buy and hold strategy where you invest in a coin and refuse to sell for an extended period of time. This passive approach is often tempting to new traders due to its simplicity and is often falsely associated with reducing ones risk.
However, youll unlikely amount to any significant wins by playing it too safe, so dive in, take on the adequate risk and ensure you have a plan mapped out because trading crypto can be a fun and profitable endeavour when executed correctly.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
See-saw image via Shutterstock
Here is the original post:
Mastering Emotions and Managing Risk in Cryptocurrency Trading - Coindesk
- Regulating Bitcoin: WEF2020 Announced A Global Consortium For Cryptocurrency Governance - CryptoPotato - January 25th, 2020
- Research: Ether Was the Cryptocurrency Most Correlated to Other Coins in 2019 - Cointelegraph - January 25th, 2020
- The Dark Side of Becoming the Next Bitcoin - CCN.com - January 25th, 2020
- Cryptocurrency Market Update: Bitcoin, Ripple and Ethereum dive into the rabbit holes - FXStreet - January 25th, 2020
- Bank of England to consider adopting cryptocurrency - The Guardian - January 25th, 2020
- Crypto Tidbits: Bitcoin Hits $9,000, Institutional Cryptocurrency Investment Spikes, NBA Team Uses Ethereum - newsBTC - January 25th, 2020
- How Cybercriminals Are Converting Cryptocurrency to Cash - BankInfoSecurity.com - January 25th, 2020
- Cryptocurrency and OFAC: Beware of the Sanctions Risks - JD Supra - January 25th, 2020
- Alleged BTC-e boss will be extradited to France over cryptocurrency fraud - The Next Web - January 25th, 2020
- Indian central bank: Cryptocurrency is not banned in the country - FXStreet - January 25th, 2020
- Can Cryptocurrency be Regulated? - CryptoTicker - January 25th, 2020
- Latest news on the cryptocurrency market - Born2Invest - January 25th, 2020
- Plasticoin, the cryptocurrency that wants to clean up Uruguay's coast - Contxto - January 25th, 2020
- How to Evaluate the Potential of a New Cryptocurrency - Live Bitcoin News - January 25th, 2020
- Bitcoin Indicator that Crashed Price to $3.1K Returns: The Dreaded Death Cross - newsBTC - January 25th, 2020
- What Is a Cryptocurrency? We Need Clearer Definitions - Coindesk - January 5th, 2020
- Cryptocurrency Will Not Die: Mainstream Media on Bitcoin in 2019 - Cointelegraph - January 5th, 2020
- South Korea Works to Bring Cryptocurrency Into the Mainstream - The Diplomat - January 5th, 2020
- Chinas Dichotomy Between Cryptocurrency And Blockchain - Forbes - January 5th, 2020
- Google lifts ban on Ethereum wallet app it thought was mining cryptocurrency - TNW - January 5th, 2020
- Why a Technical Analyst Believes Bitcoin Cash (BCH) Will Surge by 80% - newsBTC - January 5th, 2020
- Forget Brexit, Think Blockchain and Cryptocurrency - FXStreet - January 5th, 2020
- Why Analysts Are Bullish On Cryptocurrency As Bitcoin Turns 11 - Ethereum World News - January 5th, 2020
- 7 Big Bitcoin and Cryptocurrency Predictions for 2020 - The Daily Hodl - January 5th, 2020
- Top Analyst Brands XRP a Moonshot Investment; Heres Why - Ethereum World News - January 5th, 2020
- Ian Balina, The Controversial Face Of Cryptocurrency - Nasdaq - January 5th, 2020
- Cryptocurrency in Arab World: Clock is Ticking, But Pace is Slow - Finance Magnates - January 5th, 2020
- Is Cryptocurrency Inheritable? Yes, Here is How it Works - Bitcoin & Crypto Guide - Altcoin Buzz - January 5th, 2020
- Upbits Stolen Ethereum Is Moving, and Its Bad News for ETH - newsBTC - January 5th, 2020
- Bitcoin Hash Rate 8x Higher Now Than At $20,000 Top; Why Its Bullish - Ethereum World News - January 5th, 2020
- U.S. Authorities Arrest Virgil Griffith For Teaching Cryptocurrency And Blockchain - Forbes - November 30th, 2019
- What Hides Behind South Korean Cryptocurrency Regulation Policy? - The Diplomat - November 30th, 2019
- Thailand: Cryptocurrency Law Will Change in 2020 to Stay Competitive - Cointelegraph - November 30th, 2019
- The Cryptocurrency Market Update: Bitcoin back on recovery track, Ripple and Ethereum follow the lead - FXStreet - November 30th, 2019
- CipherTrace Q3 2019 Cryptocurrency AML Report: 2/3 of the Top 120 - AiThority - November 30th, 2019
- XRP and Ripple Name-Dropped on BBC Segment on Cryptocurrency - Ethereum World News - November 30th, 2019
- Cryptocurrency Crime Spikes This Year and SMBs are Paying the Price - Commercial Integrator - November 30th, 2019
- This Cryptocurrency Is Up 11310% in a Week. Legit Scam or Just Legit? - CCN.com - November 30th, 2019
- Akon has started building Akon City in Senegal with focus on cryptocurrency and renewable energy - Evening Standard - November 30th, 2019
- $150 Billion Cryptocurrency Boom Is Here Buy This ETF to Profit - Banyan Hill Publishing - November 30th, 2019
- Is a Cryptocurrency Derivatives Boom On Its Way? - Yahoo Finance - November 17th, 2019
- 2 men arrested in elaborate plot to steal $550K in cryptocurrency by hacking social media accounts - USA TODAY - November 17th, 2019
- This cryptocurrencys price just pumped 7,000%, but why? - Decrypt - November 17th, 2019
- The cryptocurrency market update: Bitcoin and major altcoins pass the time in ranges - FXStreet - November 17th, 2019
- Crypto-corruption In 2018, a major Russian cryptocurrency exchange lost $450 million in Bitcoin. Now, the exchange's founder is saying he transferred... - November 17th, 2019
- Big Canadian bank rumored to offer cryptocurrency accounts, Bitcoin trading - The Next Web - November 17th, 2019
- Switzerland gets another Bitcoin bank that holds cryptocurrency for customers - The Next Web - November 17th, 2019
- Banning Cryptocurrency Is Not On Indian Parliaments Winter Session Agenda - Inc42 Media - November 17th, 2019
- What Could Trigger the Next Cryptocurrency Alt Season? - Dash News - November 17th, 2019
- U.S. cant let criminals get the upper hand by using Chinas coming cryptocurrency - MarketWatch - November 17th, 2019
- China planning to reward its soldiers with cryptocurrency - FXStreet - November 17th, 2019
- Creativity and Value Will Win the Cryptocurrency Exchange Wars - newsBTC - November 17th, 2019
- Cryptocurrency Exchange Bankruptcies Are the Failed ICOs of 2019 - BeInCrypto - November 17th, 2019
- Beware of cryptocurrency gurus like Dr Ruja and her OneCoin cult - Jim Duffy - The Scotsman - November 17th, 2019
- China to reward troops with cryptocurrency bonuses - Express - November 17th, 2019
- The cryptocurrency market update: Bitcoin and major altcoins are vulnerable to further losses - FXStreet - November 17th, 2019
- Helium is building a peer-to-peer internet-of-things network - Fast Company - November 17th, 2019
- Coinbase Announces its Upcoming Cryptocurrency IRA - The Merkle Hash - November 17th, 2019
- Three Classic Coins That Attempt To Preserve Existing Cryptocurrency Features - Bitrates - November 17th, 2019
- Cryptocurrency tracking improves -- but how? - FCW.com - November 9th, 2019
- Senator Romney Considers Action As A Nation On Cryptocurrency Threat To Homeland Security - Forbes - November 9th, 2019
- Why Is the Stellar Lumen Cryptocurrency Up 18% Today? - Motley Fool - November 9th, 2019
- Cryptocurrency This Week: Facebooks Marcus Terms Bitcoin Not A Currency; Regulation A Must, ... - Inc42 Media - November 9th, 2019
- Vancouver-based cryptocurrency exchange latest to shutter with millions owing to clients - Vancouver Sun - November 9th, 2019
- Governments race to beat Facebook's cryptocurrency, libra, at its own game: Don Pittis - CBC.ca - November 9th, 2019
- Cryptocurrency for Africa: Akon Reveals When He's Going to Launch His Own Coin - U.Today - November 9th, 2019
- Swell the News? XRP Drops 5% as Ripples Flagship Event Kicks Off - Cointelegraph - November 9th, 2019
- Why Are Cryptocurrencies Becoming a Mainstay of International Business Platforms? - CryptoNewsZ - November 9th, 2019
- Startup Targets Cryptocurrency Crime - But Will The Big Banks Come On Board? - Forbes - October 24th, 2019
- Major Bitcoin Miner Warns The Cryptocurrency Needs Better Privacy - Forbes - October 24th, 2019
- Why Cryptocurrency is in The Spotlight For More Central Banks - newsBTC - October 24th, 2019
- Cryptocurrency Mining Hardware Market 2019-2023 | Evolving Opportunities with Advanced Micro Devices, Inc and Baikal Miner | Technavio - Business Wire - October 24th, 2019
- Bank of Canada Warms To National Cryptocurrency, Will it Compete Against Bitcoin? - newsBTC - October 24th, 2019
- Facebook's Cryptocurrency Libra Could Threaten Alipay and WeChat Pay, Tencent Says - CryptoGlobe - October 24th, 2019
- Are Smart Cities The Pathway To Blockchain And Cryptocurrency Adoption? - Forbes - October 24th, 2019
- Where US Regulators Stand on Cryptocurrency - Bitcoin News - October 24th, 2019
- Europol: Bitcoin is the principal cryptocurrency used in the dark web - FXStreet - October 17th, 2019
- SEC puts a stop to Telegram's cryptocurrency plans in the US - Engadget - October 17th, 2019
- Alert: IRS Releases Long-Awaited Guidance on Taxation of Cryptocurrency Transactions - JD Supra - October 17th, 2019
- Chinas Global Cryptocurrency May Be on the Horizon - ETF Trends - October 17th, 2019