Making a loss is a constant for every investor, however with risk management an investor's profit will outshine his losses. In crypto trading, the golden rule for investors is to protect their capital at all costs. We'll do an expatiate, but first let's break the whole thing down.
What's a Trade??
Trade is simply buying and or selling of any commodity, and in this case, we buy and sell cryptocurrencies (usually to make profits). In every transaction that takes place, there's always a certain risk attached, so that there's no trade or transaction that is totally risk-free. However, within a reasonable man's standard, one will agree without doubting that there are different degree levels attached to various risks. The million dollar question then would be "how can one effectively manage his risks". Investors must agree that the crypto market promises them nothing, so we must expect the good, the bad and the ugly.
Some Tips On Risk Management While Trading
Risk what you can afford to lose: Investors should not use borrowed funds for trading neither should they use money meant for daily expenses. Investors should also never make the mistake of ever going all in, for the sake of sanity. We must learn to diversify our portfolio into different projects as a hedge to our funds.
Control your emotions: After every trade, an investor must be discipline enough to allow the market perform its magic and play out as projected. Whatever we see, we take. When we get to take profit levels, an investor must be willing and able to accept the profit so that his greed doesn't lead him to doom
DYOR: All investors must do their own research to manage their portfolio effectively. I made an earlier content on the importance of DYOR. With the knowledge on any project, an investor can easily know when to buy and when to sell.
Timing: Undoubtedly the crypto market is designed to reward investors who jump in early and sometimes stay long. This can only be useful after an investor has done his research.
Protect your capital at all cost: Recall that this is the golden rule for all investors when it comes to trading. A trade is only possible when there's capital. Capital is the wealth reserved for the production of further or other wealth. How then would an investor carry out a trade if he looses his own capital. Since I'm a trader, I'll like to relate specifically to this tip. There are scenarios where traders are in losses on some trades but are too emotional to close the trade. To close a trade with 40 percent loss involves mental strength. It must be cultivated because it is indispensable. Secure the remaining and incur the loss, there'll be other opportunities. See you all at the top.
Uncertainty in the Market: The whole crypto space is built on a probability scale, so that the only certainty is the uncertainty in the market. With this knowledge an investor will not be too certain in his decisions, because there is always an element of surprise in the market.
Flow with the trend: There are times and seasons in every financial market. A lot of people have made massive gains that are life changing, same with massive losses unfortunately. There is the bull market as well as the bear market.
Bear market = More red candlesticks than greens overall within a period of time.
Bull market = More green candlesticks than red overall within a period of time.
Take cover when necessary and exploit the most you can. The market is always there, take your time.
Trade plan and strategy: Investors must be discipline enough to make trade plans and follow them accordingly. For every trade, there must be an entry level, a take profit level and an exit level planned out strategically without haste.
NB: We should not be too rigid to follow strictly the processes involved in risk management because ironically, there's a risk attached to it as well. If an investor is too rigid in managing his trades, the risk attached to it is that he will only take trades that will yield little profits. There's also such a thing as "degen-trading or degen-traders" who accept the opinion that there are premium risks attached to trades, however they'll take them without even due-research or caution.
