The three most vulnerable groups in the cryptocurrency circle and their risk aversion strategies
In the cryptocurrency circle, there are three types of investors who are most likely to suffer losses:
First, there are those investors who have heavy spot positions and no stop loss. They often choose to invest in full without setting any stop loss mechanism.
This approach undoubtedly pushes the risk to the extreme. Once the market fluctuates unfavorably, they may face huge capital losses. For example, the market crash in May 2021 caused many such investors to suffer heavy losses.
Secondly, there are those investors who are keen on heavy contract positions and use high leverage. Although high leverage can magnify returns, it also magnifies risks. In the case of short-term market fluctuations, many such investors have their positions blown up because they cannot withstand huge fluctuations. Especially in the violent market fluctuations caused by some unexpected events, the risks of high leverage are even more exposed.
Finally, there are those investors who do not stop profits in time when they make money, and like to keep carrying orders when they lose money. Their mentality is often very dangerous. Because of greed or fear, they may miss the best time to stop profit, or be reluctant to stop loss when losing money, resulting in increasing losses.
So, how to avoid these mistakes and keep your wealth?
First, you need to manage your positions reasonably. Position management is the first rule of trading. You should invest your funds in different currencies to reduce risks. At the same time, only use a part of the funds for each transaction to avoid full position operation.
You need to set clear stop loss and take profit points. Before each transaction, you should set the stop loss and take profit points. In this way, when the market fluctuates unfavorably, you can stop loss in time to protect your principal; and when the expected return is achieved, you can also stop profit in time to lock in profits.
You need to use leverage with caution. Although leverage can increase returns, it also amplifies risks. Therefore, when using leverage, you should be cautious and do not blindly pursue high leverage.
There are gains and losses in currency circle transactions, but we should focus on the overall long-term profitability rather than one or two short-term orders. Only by managing positions and risks reasonably, staying calm and rational, can we survive and make profits in this volatile market.
