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Cryptocurrency Trading: Mastering Emotions and Managing Risk

October 13, 2019 at 6:57 AM | By Jit Sutradhar Markets

When it comes to trade, there are several steps you can take to reduce their exposure to extreme market price volatility.

A combination of both technical and fundamental analysis can be used to determine the true value of a company or asset, ensuring a greater chance of success with a particular investment while reducing risk along the way.

But for that, a plan is needed.

Mastering your emotions

Developing a plan successful risk management is critical in minimizing unexpected results, which translates into an overall reduction of its losses.

Plan successful risk management must also run parallel to their records of trade journal cryptocurrency, working together to curb bad business behavior, while at the same time justify their fundamental expectations.

Sometimes the temptation leads to bad decisions and no longer on the screen of a market is driven by fear and greed.

By reducing harmful or negative trading habits, you can expect to increase profits without putting too much on the table.

A key component of a successful risk management plan is to determine what type of trader you are and where your skills currently lies:

  • “Usually the breakeven point” – When it happens this could be a sign that their risk management is effective, however, it is also too risk averse and will fail to take advantage of something substantial or you are just able to cover trading fees.
  • “I make a small profit” – When it happens this could be a sign that risk management is effective, however, it is also an indication that you are not letting their operations running. It usually is driven by emotion-laden decisions made hastily, as close a position too early because of what is known as “weak hands”.
  • “I make a big profit” – When this happens, it is a sign that your risk management strategy is working well and has reached a pinnacle of risk aversion by applying commercial sizes with corresponding risk. Usually, it is an indication that positions at predetermined prices closed and let others take their course.
  • “Usually I lose” – When it happens this could be a sign that you understand the cycles of limited market, I need to advance their research on asset class that are investing and tend to collect liquids projects / coins / tokens .

From these characters you can draw a rough idea where he currently sits in terms of their commercial mentality. The idea is to identify what habits are forcing lose and those who are guiding you to benefit habits.

Try to remain stoic and reasoned, removing emotion from the psychological aspect of trading, while relying solely on the information in front of you, such as price, volume, news and trends.

Do not put all your eggs in one basket

No matter how tempting or promising a particular business opportunity may seem that it’s never a good idea to put all of their value on the line.

In general, an extension of a particular type of asset classes (and a generous mixture of different asset classes in their portfolios) is a wide extent to reduce its exposure to the largest price moves within an industry / particular market.

Cryptocurrency market volatility means that any trade, even a seemingly perfect trade, may collapse and cause a significant loss. Therefore, it is recommended to start investing 5 or more different currencies.

Also remember to take advantage of the stop-loss function of exchange and use it to your advantage when you’re away from manually operate as break times or at work.

Again and again new traders do not incorporate a proper exit strategy, often come back to your computer for his beloved crypto basket have fallen 20 percent and a new trend has developed downward. This act not only reduces your risk, but allows greater control over their losses.

Finally, it may be tempting to use a strategy of buy and hold where you invest in a currency and refuse to sell for an extended period of time. This passive approach is often tempting for new entrants, because of its simplicity and often falsely associated with reduced risk.

However, it will amount unlikely that any significant gain by playing too safe, so to dive, take appropriate risk and make sure you have a plot plan because cryptography trading can be a fun and profitable endeavor when executed correctly.

Disclosure: The author does not hold assets cryptocurrency at the time of writing.

Trading image via Shutterstock

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