Cryptocurrency is volatile, and trading it can sometimes be risky, especially for new investors. However, there are ways to manage cryptocurrency risks and become a smart investor. In this article, we’ll explore six cryptocurrency risk management strategies black investors should know.
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Have an Exit Strategy Ready
Having an exit strategy is an effective way of reducing the risk of heavy losses. When you stick to the plan, you can take profits or cut losses at a specified point.
Generally, it’s tempting to keep going when you’re making profits or to put much faith in crypto even when the price is falling. One sure way to implement an exit strategy is to use limit orders. You can set the orders to automatically trigger at your predetermined price limit, whether you intend to cut down losses or take profits.
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Diversify Your Portfolio
Regarding cryptocurrency or any other investments, it’s advisable not to put all your eggs in one basket. A diversified portfolio won’t be too heavily invested in one particular coin. This reduces the risk of huge losses on a particular cryptocurrency.
For example, you can hold several tokens and coins while providing loans and liquidity. Several cryptocurrency risk management strategies that’ll teach you how to diversify your portfolio are available on Amazon. You can buy one or two to learn how to apply the strategy.
Use the 1% Rule
The 1% rule is a cryptocurrency risk management strategy that entails not risking above 1% of your total capital in a trade or investment. For example, if you have $5,000 to invest and want to stick to the 1% rule, you could buy Bitcoin worth $5,000 and set a stop-limit order or a stop-loss at $4950.
Here, you would cut your losses at $50, 1% of your total investment capital. This one percent rule is among the top cryptocurrency risk management strategies. It helps to suppress the urge to risk too much.
Without following such a strategy, one can easily get greedy and invest more than he can afford to lose. On Amazon, you’ll find a good number of books that cover the 1% rule very well. You can purchase them to learn more about the 1% rule risk management strategy.
Do Your Home Work
Research is an important cryptocurrency risk management strategy for black investors. With technological advancement, it’s easier than before to do your homework before investing in any coin or token.
Before investing in any token, coin, or project, you should do the due diligence. It’s important that you check and verify key details about a cryptocurrency, including its whitepaper, community, tokenomics, roadmap, partnership, and other vital information.
Remember that wrong information spreads quickly these days, and anyone can post their personal opinion online as fact. When researching a cryptocurrency, consider the reputation and credibility of the platform that you’re getting the information from.
Accept Your Losses
At some point, every crypto trader experiences losses. While no one wants or likes them, they’re inevitable. So, it’s advisable not to chase losses and don’t allow them to push you into making irrational decisions.
As with stocks and other investments, risk is part of the crypto trading experience that can’t be totally removed. Rather than think that everything will always go your way, a professional trader will identify risk areas and determine how to minimize them.
Following the five cryptocurrency risk management strategies covered here will help black investors cut losses and maximize profits. You can get one or two cryptocurrency trading guides on Amazon to learn the best ways to profit from the market.
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