Are you planning to invest your money in the Crypto world? Are you willing to get higher returns by Cryptocurrency investments? If so, you should know about the possible risks and develop risk management strategies as per that.
Managing risks will always help you in getting higher returns. So, in case you want to get the money you have already out into the world of Crypto, you should know proper risk management. But initially, knowing the types of risks is the best.
Types Of Risks
We are all aware of the fact that Crypto trading is exposed to several risks. The best trading platforms, like news spy will always guide you with all types of risk management strategies. Here is the list of 5 main types of Crypto trading list you should consider.
1. Legal Risks
Legal risks imply all the possibilities of negative events happening with respect to the regulatory rules—for example, a ban on all sorts of Cryptocurrency in a particular country or state.
2. Market Risk
Market risks mainly refer to the fluctuations of Cryptocurrency prices contrary to your desire in a specific open position. We all are quite familiar and totally aware of this type of risk.
3. Liquidity Risk
In the sector of Crypto trading, the liquidity risk is all about the chances of traders being incapacitated or unable to convert their entire Crypto position to traditional fiat currencies, such as YEN, USD, GBP.
4. Credit Risk
This type of risk is related to the possibility that the parties, which are the backbone of Crypto projects, fail to fulfill their due obligations. In most cases, credit risk is attributed to fraud and theft in the Cryptocurrency market.
5. Operational Risk
Operational risk is nothing but the chances when the traders are unable to deposit, trade, or even withdraw money in their respective Crypto wallets.
Techniques Of Manage Risks When Dealing In Cryptocurrencies
Now, you have developed a basic understanding of the risks of the Crypto market. So, it is time to know about managing those risks. Here are some strategies or tactics you can consider when you are planning to get higher returns from your Crypto investments.
1. Position Sizing
It dictates how many Crypto tokens or coins a trader is planning to buy. The possibility of realizing significant profits in the Crypto trading space allows traders to invest around 30%, 50%, or even in some cases 100% of their trading capitals.
2. Risk/Reward Ratio
It is basically comparing the actual risk level with the potential of returns. It will be worth taking the risk when there is a possibility of gaining more returns than usual. By understanding the risk/reward ratio, you will be able to decide when you should enter a trade and when it is not the right time.
3. Stop Loss And Take Profit
Stop-loss implies an order, which can be executed and closes a wide-open position only when the price of a Cryptocurrency decreases to a particular barrier. On the other hand, take profit is another executable order, which is about liquidating open orders when the prices are rising to a particular level.
Some Winning Strategies
It is obvious that after knowing the possible crypto risks and risk management strategies, you will plan your Crypto investment on the basis of them. But here are some winning strategies, which you have to consider when you are preparing your plan.
- Consider Fees.
- Accept Failures.
- Measure Downtime.
- Focus On The Win Rate.
Manage Risks When Dealing In Cryptocurrencies
Whenever you are thinking of investment, especially Cryptocurrency investment, risks will come along with them. No matter how knowledgeable or experienced you are, you can never eliminate the risks totally.
But what you actually can do is develop strategies, which will minimize those possible risks and open the door of higher returns in front of you. Risk management is all about developing those strategies based on your knowledge and experience.