Cryptocurrency: The Need For Risk Management
Everything we do in life has some level of risk attached to it. Thus, it is very important that we learn to manage risks properly. Risk not managed but ignored can often lead to several disasters both emotionally, physically, psychologically, financially and all round. I bet you don't want to experience the impact of poor risk management.
When we talk about risk, we talk of the dangers and bad sides associated with anything at all. As we all know everything cannot be good about something. There must always be two sides to a coin. Meaning, anything that has advantages must equally have some disadvantages. But then again, these bad sides can be managed and controlled since we cannot always eliminate them in most cases. You can't take away risks but you can reduce it to a level you can afford to take.
Sadly, many often ignore risks and this in all cases doesn't always end them well. When you ignore the risks involved then you should be ready to pay the price or bear the consequences that will come. Yes, consequences will always come because "to every action, there's always an equal and opposite reaction." In this case, when you manage your risks poorly or even ignore risks involved in doing a certain thing, the consequences for that decision/ action of yours will always come.
You won't like the consequences but you can't escape it either. Which is why, we should always pay attention to risks involved and equally be intentional and deliberate about adequate risk management especially when dealing with cryptocurrency.
Risk Management and Crypto Investments
If there's any sector that requires maximum risk management, it is the business of cryptocurrency. Why? This is because cryptocurrency prices is the next most volatile thing after gas. The nature of cryptocurrency prices is such that it usually records high fluctuations and volatility. The closest thing to stability about cryptocurrency are stablecoins.
For this reason, every cryptocurrency investor or trader should always and intentionally manage his/her risks while indulging crypto assets. Risk management should be the most prioritize thing in the mind of every person dealing with cryptocurrency assets.
Before you think of profits, you should first learn and understand risk management. Failure to adhere to this will always result in the loss of profits and capital to the market. Risk Management is what helps you to keep your profits, save your capital and last longer in the market. Risk management and profits work in pari passu.
What's the point of making profits when you will give it back to the market? Particularly for traders in the derivatives market like futures, risk management should be your anchor thing. However, it appears that many have left risk management in the mud and the outcome is what we always see in form of liquidations. In this brief period of market crash, we have seen billions of liquidations in the market and what's the major cause? Poor risk management!
The major risk in cryptocurrency trading is that, you could lose your profits plus capital at any given time. This is so because you cannot control the movements of the market. Yes, you can speculate and draw lines on the charts but we all know that no one has ever been able to predict the market hundred percent and no one will be able to do that. The cryptocurrency market is not a one-man show so, it's movements cannot always be certain.
For the fact that uncertainty rules the market then it becomes highly imperative for a person to manage risks properly thereby reducing the chances of being rekt. What we see most often is that some traders ignore risk management and instead choose the opposite which is greed.
Ways To Manage Your Risks In Cryptocurrency Trading
Below, I will be sharing some ways I think can help a person to manage his/ her risks adequately in this volatile cryptocurrency market. Thereby, retaining profits made, preserving capital and lasting longer in the market.
Garner Adequate and Relevant Knowledge The first step towards risk management is getting the relevant and needed knowledge for the crypto business. Not just with cryptocurrency, to excel in any business at all, you need the right knowledge and mindset. With the right knowledge, you will always take the right decisions and not decisions that will lead you to excess losses.
To get this knowledge, you have to pay the price of indepth study and reading. With the internet, you can get all the knowledge you want about cryptocurrency investments. If possible, get a mentor for coaching. All of these will help you last longer in the market.
Don't Trade All The Time: You need to know that, sometimes, not trading is a trading skill. As a cryptocurrency trader, it is unwise and unsafe to keep placing trades or entering positions all of the time. Sometimes, it is wise to just monitor the market, observe and let the market be. That way, you could be reducing your chances of losing funds. Trade only when you are emotional stable and all signals are clear. Remember that emotional trading can be very disastrous.
Don't Be Greedy: Greed has caused many to give back their profits plus capital to the market. In a bid to make 1000X, many have been liquidated and sent out of the market. In a nutshell, take profits when you should and move on. Don't try making all the money in one day. In the real sense, 1000X is often unrealistic and risky. You might end up losing all because of greed. It is greed that makes a trader use very high leverage level which often results in quick liquidation.
Use Stop-Loss, Take Profits: Profits not taken is an illusion. It is important to take profits and invest in other businesses or meet other real-life needs. Also, employ the stop-loss concept when it is necessary. When it's clear that the market is going south against your speculations, it is wisdom to take some losses and preserve your capital. Stop having false hopes. Losing some is always better than losing all.
Final Thoughts
Risks cannot be avoided but can be managed. The cryptocurrency market is very uncertain and volatile hence, manage your risks and never ignore the risks involved. This way, your crypto journey will be a fruitful one and not a useless journey. Risk management will help you keep your profits, preserve your capital as well as last long in the market.
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