RISK MANAGEMENT IN CRYPTO TRADING
As the market continues to drop rapidly from an estimated $3Trillion market Cap to now that the market is barely above $1Trln market cap . The need to apply proper risk management when making any transaction in the crypto space is a necessary factor.
It’s been a run from last year’s bull run to the present moment , from the run of Defi projects , to NFT projects, to Gamefi projects down to Metaverse projects and the rides that came with last year’s bull run , relaxation is setting in and many people having lost a lot is either because you don’t understand the cryptocurrency cycle or you knew and didn’t apply proper risk management.
What is Risk Management ?
Risk management is being able to control possible losses from an unsuccessful transaction.
What are the top mistakes traders make;
- Revenge trading : You place a trade , it turns out bad , so now you’ve decided to go make the money back , to compensate for your losses, this certainly leads to bad market decisions and which will result to greater losses. Try to record your losses and make the best decision after any bad trade
- Self Confidence: This is a very important skill in your trading career as it helps you make decisions and stand by them. But overconfidence will play a very dirty trick to you especially when it comes to trading as it’ll expose you to invest more than your portfolio can hold incase market goes sideways , thread carefully comrade.
- Neglect of Stop loss and Take profit orders: As a trader, it’s obvious that one of the first things we learn is how to successfully place your orders , and then how to take , trail and keep profits and also how to minimize losses. So neglect of these is bad . At SeriesX, we try as much as possible to make sure all our trades never go beyond 20% loss on any amount you enter a position with , and also we start locking in profits from 50% . You can use it , might come in handy later. This user is pleased to help , Lol
As we’ve talked about the mistakes traders make , let’s talk about the ways to maintain a healthy portfolio.
What are the best ways to keep your portfolio safe while trading ;
- Trading Plan: We must have heard of this popular saying, “Plan the trade , trade the Plan” . The former is easy , but the latter is always hard . In this highly volatile market , a trading plan will always help you manage your risk better . It will also help you increase consistency and maintain profitability as it makes you accustomed to a particular method of trading and as long as you don’t derail from those methods , you’ll always be safe in your methods, refine them when you notice hookups in your methods and keep going
- Avoid Revenge trading: A trader sustains both profits and losses in the market , a profitable trader is not only the one who makes more profits than losses, he’s also one who knows when the market is not favorable to his conditions ,decides to rest and try again later. If you can maintain a healthy portfolio , you can only do that by knowing when the market is actually fucked up and decide to leave .
- Money management: Experts will say don’t use more than 5% of your portfolio to enter trade , I’ll say Building portfolios should use at most 20% , because we understand that some have very small portfolios, so the appetite to get a reasonable profit props in , always understand this ” Your method works for you” explore it enough . And most importantly stick to it. If you must use 20% reduce it as your margin grows , in this way , you keep building a strong portfolio for yourself .
- Never neglect Stop loss and Take profit orders : If you don’t place your Stop loss , you’re exposed to the volatile market conditions. If you don’t place take profits ,you can’t keep any money. At SeriesX, we emphasize on the fact that if you don’t hold stables , you’re not in profit yet . Always learn to lock a reasonable amount of your portfolio in stables in that way you’re not exposed to the volatile market Conditions. Emphasis on Collaterized stablecoins like USDC , USDT , BUSD.
Conclusion
Risk management is something we hear everyday, but the one we’re able to follow is the one we can take a key part on and it’s only in that way we’re able to keep our portfolio safe and of course healthy .
Even you’re a normal trader , a Defi researcher or an NFT Degen with this risk management methods , you can maintain a healthy and profitable portfolio.
We have your best interest at heart and we always wish you stay profitable, see you on the green side
