The following are the effective strategies that help prevent losing your money by engaging in cryptocurrency trading
- Consider using Stop-loss in Every Transaction – Novice traders assume that stop-loss is a voluntary type of order that professional traders sometimes use, but the reality is it is necessary for all trades. Experienced traders will always try using stop-loss in every transaction, as they are aware that making clear decisions regarding the losses that they are ready to accept is as crucial as planning where to make a profit.
- Never Follow the Price – There is a tendency seen among novice traders to purchase coins when they see an increase in price on the chart. This happens due to the fear of losing when they see an increase in price. People believe that the price of cryptocurrencies can go on increasing 10 times higher from its starting point.
However, many times it has happened for beginners to have short buy prior to the increase after which the price may decrease again for a longer period of time.
- Never Invest the Whole Amount in Single Trade – One of the greatest mistakes that new traders make is investing big bucks in one trade. As all trades always involve risk, it is a game of numbers about how much capital you have to risk each time. A great deal of money in one trade can result in a huge reduction of total trading capital in a short period of time. However, this is something that often happens to beginners.
Therefore, it is advisable that a trader should never take beyond a few percent of the total traded capital in a single trade. The maximum capital that traders need to consider is 5%. If you take 5% of your total capital and the risk will be 10%, this means that you have set your stop loss to 10%. This will be a loss of 0.5% on your total capital.
- Never Trade with Borrowed Money – Trading with borrowed money involve high risk and it may be suitable for experienced traders who have extensive experience in trading cryptocurrencies.
- Purchase Cryptocurrency from Reliable Sources – You can purchase Bitcoin in many ways. However, you need to consider a reliable online exchange like Binance, Coinbase, or Gemini.
- Never Leave Your Cryptocurrency on an Exchange – After buying your cryptocurrency through an online exchange, never leave them on the exchange for a longer period. This due to these exchanges are likely to get hacked and you will not be able to do anything. So, it is advisable that as soon as you purchase your cryptocurrencies consider moving them to your private cold-storage wallet.
- Must Pick Your Wallet Carefully – Hardware wallets appear on USB devices. While considering investing in a digital wallet, make sure to choose a wallet service provider that has been on market for a long time. Even though there are some great wallet service providers available now, sometimes their wallets may not be reliable and effective and can be easily misused by fraudsters.