Whether you’re trading a small or large volume of cryptocurrency, it’s best to engage in the activity like a responsible trader. By utilizing standard techniques, you can lessen the risks associated with trades and ensure that you’re trading with an amount you can feel comfortable losing. The crypto market often sees traders get lost in trading and blow their accounts.
Responsible cryptocurrency trading goes beyond segmenting your balance to manage risk. It involves getting a grip on your trading behavior and cutting out emotions from your trading activity. Also, you need to begin recording your trades to see where you might have gone wrong or if a loss can be attributed to random noise. This way, you can enhance your strategy.
You can trade in digital currencies in numerous ways. Some investors prefer perpetual futures to get a higher level of returns. Another segment of investors trades at https://www.binaryoptions.com/broker/pocket-option/pocket-option-demo-account/ to facilitate safe bitcoin binary options trading before delving into the live market. Risk-averse traders prefer to make spot trades to profit when the crypto asset increases in price.
Responsible traders avoid activities that can prompt them to make unnecessary trades. Most traders only understand these negative activities after extensive participation in the digital currency market.
This article will show you tips for making responsible trades and having a better trading experience.
Responsible Cryptocurrency Trading Techniques
- Improve the Cybersecurity of Your Trading Account
Before starting any trading activity, you must first enhance the cybersecurity level in your trading account. No one wants to use a near-perfect strategy to make profits and then lose it all to some hacker.
You can boost your cybersecurity level in several ways, such as using multi-factor authentication and a strong password. If your trading platform doesn’t offer two-factor authentication, you need to make a change.
When creating strong passwords, you have to make sure that the password doesn’t hold any form of relation to you. For instance, creating simple passwords that contain your birthdate or pet’s name. Your password has to be a mix of upper- and lower-case letters, numbers, and symbols. You can use a password management tool if you run out of security code ideas.
- Establish a Trading Plan
A great way to cut off emotions from your trading activity is to establish a trading plan and strictly follow it. When you do this, you wouldn’t be moved by a loss, a win, or other factors that cause fear of uncertainty and doubt (FUD).
Your trading plan needs to contain the type of trades you want to use as your conditions for entering these trades, and what you want to get out of your trading. Generally, your trading plan will reflect your style, depending on whether you’re risk-averse or a risk-taker.
Trading plans typically include the maximum amount you can leverage, a percentage range for trading positions, stop-loss, and take-profit levels.
- Leverage Stop-Loss and Take-Profit Commands
Stop-losses and take-profits allow you to exercise better control over your trading activities. No matter how active you are, you can never stare at a screen throughout the day. The cryptocurrency market is also highly volatile and switches trends before you can make an order.
That’s why you need to use stop-loss and take-profit orders to trigger automatic trades. For instance, if you buy Bitcoin at $20,000 and you’re okay with a profit of $30,000, you can set a take-profit order at that price. You can also decide to set a stop-loss at $18,000 to prevent your balance from going lower.
Once the market price of your traded asset reaches any of those levels, there’ll be an automatic sell-off.
- Do Your Own Research
Do your own research (DYOR) is a phrase heavily sounded in the markets by crypto enthusiasts. The idea is to check out several sources about a particular digital asset or crypto exchange before you place your money in them.
Suppose you feel a particular digital currency isn’t safe enough and is too volatile. In that case, you can avoid investing in that coin.
- Perform Asset Diversification
Asset diversification involves dispersing your money across several crypto assets. Doing this reduces your risk since you would be less affected by a percentage drop in a particular digital currency.
Asset diversification involves buying up different crypto assets to hedge your risk. You can further diversify your holdings by investing in liquidity pools and stablecoins.
Final Thoughts
Making responsible trades should be the most crucial factor when you become a crypto investor. To have a remote chance at becoming an accountable crypto trader, you have to create stellar plans. When you go through your trading plans, you can evaluate whether to change or preserve them.
You also need to cut off your emotions when you engage in trading. The key things you need to do are performing research, asset diversification, avoiding FUD, and securing your cryptocurrency trading account.
