To do crypto trading in a responsible manner, you need to do more than keep track of how much money you are buying and selling. Trading should not be based on your emotions, but you need to control it. You must also take responsibility and know if what you do is really beneficial to you. This requires that you manage different aspects of your trading behaviors. This does not begin and end at the buy or sale button. As many of the following tips as you possibly can, try to incorporate them into your trading routine. Although it may seem like there is a lot to learn, with these trading tips you will be able to improve your trading.
How to Secure Your Crypto Trading Account and Wallet
Secure your account before you start trading. Even if you carefully plan your trades and are very responsible, your account, funds, and password will be compromised. This can be done in several ways: using two-factor authentication (2FA), creating a strong password, or adding withdrawal addresses to a whitelist.
You can use the same private key if you are also using an external cryptocurrency wallet. Just like your bank details, your private key and seed phrase should not be shared with anyone. Store some funds in your hardware wallet for safety.
Create A Crypto Trading Plan
To avoid letting your emotions affect your trading, create a plan. Then stick to it. The sudden gain, loss, rumors, and FUD (Fear Uncertainty, or Doubt), cannot affect your decision-making. What exactly goes into creating a trading plan, then?
A trading plan will outline your trading goals, trading conditions, and the types of trades you intend to make. What your trading limits are will depend on your risk profile, and how you trade. Your trading plan should be created with an open mind. Your trading plan could include:
- What you sell or trade
- Your crypto asset allocation
- How diversified your portfolio is
- How much leverage, if any, do you wish to use
- Specific trades and their entry and exit prices
- The maximum investment as a percentage
- When to stop trading.
- How much leverage, if any, do you wish to use
- Maximum losses
Use Stop-Limit Orders
Coinrule allows you to easily place stop-limit orders for better control of your trading. Crypto is volatile and you cannot be glued to a screen all the time. You may suffer unexpected losses. Automated trading allows you to control your trades according to your set criteria. It is not responsible for leaving large amounts without protection from volatility. You can use a stop-limit order to stay on track with your trading plan once you have created it.
Imagine that you bought one bitcoin (BTC), valued at $15,000. The price of Bitcoin has now risen to $40,000. You need to be sure that, if the Bitcoin price drops, your sale won’t fall below $30,000. You’ll end up with a profit of $15,000 if you do this. This can be automated by creating a Sell Stop-Limit Order on Coinrule.
This price is what will trigger the limit order. If you set your limit price at $30,000, then 1 BTC would sell for that price or more if the price of the stop is reached.
A gap between stop and limit prices will give your stop-limit orders the best chance of being filled. A gap is necessary because the market can move below your limit prices without fulfilling your order.
It’s important to note that stop-limit orders aren’t guaranteed to be filled, but when they are, you get the price or even better.
Do Your Own Research
Trading Academy provides educational and research materials, but this is only the beginning of the analysis. Do your research (DYOR), to confirm and double-check any information that you find. This advice is applicable to trading and investing in crypto through your preferred exchange, as well as using Decentralized Financial (DeFi) Products. Your risk profile is unique to you, so only you can decide what is right for your portfolio. Make sure that you understand the risks involved before you invest or trade.
Diversify Your Portfolio
To reduce risk, you need to consider portfolio diversification when you create a trading program. It is riskier to hold just one or a few assets in your portfolio. You can diversify by investing across different asset classes.
To begin, define your asset allocation. You could invest in DeFi liquid pools, derivatives such as Stablecoin, or derivatives. Reduce your exposure to just one crypto class to reduce the risk of big losses. If you invest in a liquid pool, you could experience an impermanent drop but offset that loss with staking profits.
You can then choose to diversify between these different asset categories. Stablecoins are a great way to lower your portfolio’s risk. These are just a few examples. There are many responsible ways to plan your crypto-assets.
Avoid FOMO
Fear of Missing out (FOMO), or the fear of being left behind, is a common emotion among traders. But you must be careful about how it impacts your actions. You may abandon your trading plans and limits out of fear that you will miss an investment opportunity. The Internet, social networks, and other channels of communication provide an abundance of information. This makes us all more susceptible.
It is possible to research and find great investment opportunities online. However, it is important to watch out for shilling. Users with ulterior motives, such as financial gain, will promote coins or projects regardless of actual value. Shillers use FOMO as a way to manipulate traders. You may feel you’re missing a great opportunity, but you need to do some research before you put your money at risk.
A lot of factors can lead to FOMO. Recognizing their triggers can help you understand them. They include:
- Social media Twitter and Telegram contain false information. Always DYOR. Many influencers receive payment to promote altcoins or projects. Scammers can also take advantage of your FOMO in order to steal funds.
- Gains It can be tempting, when you’re on a winning spree, to become reckless. You might also be overconfident about your abilities and end up making bad choices. Even if your investment has been successful, you may still feel FOMO about other “bigger” opportunities.
- Losses In an effort to recover lost funds, FOMO can rise. FOMO can cause you to enter a trade, then exit the position after losing, and then return. Both can result in even greater losses.
- Volatility Price fluctuations can be large in either direction and provide an opportunity to profit. You can easily get carried away when you invest and hope the price goes up, or short the cryptocurrency market during a decline. You may also think that a bearish stock market is a good time to invest. However, you might end up investing in a falling blade.
Learn How to Trade Crypto With Leveraged Trading
Borrowing money to trade futures or on margin can seem attractive. With this risk comes the possibility of being liquidated, losing your capital and your profits quickly. You don’t have to fear liquidation if you know what your limits are. Responsible trading is not trading that results in a loss greater than what you had planned, or risks too much. Make sure you fully understand the concept of leverage before you use it.
You might have noticed leverage shown as a multiplier such as 10x. It is a way to multiply your capital by 10, which in turn increases it by 10. Leveraging $10,000 10x will give you $100,000 in trading capital, while your initial capital covers your losses. Once your initial capital is gone, the exchange liquidates all your positions.
These tips will guide you in trading crypto responsibly. Coinrule offers an automated trading bot for cryptocurrency investors.
Conclusion
Responsible cryptocurrency trading requires more than just keeping track of your transactions. It involves a comprehensive approach to managing your trading behaviors, securing your accounts, and making informed decisions based on a well-thought-out plan. By implementing strategies such as creating a trading plan, using stop-limit orders, conducting thorough research, diversifying your portfolio, and avoiding the pitfalls of FOMO and over-leverage, you can navigate the volatile crypto markets with greater confidence and control. As you continue to refine your trading practices, tools like Coinrule’s automated trading bots can further support your efforts to trade responsibly and effectively in this dynamic landscape.
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