Blockchain and Cryptocurrency Beginner - Practical demonstration of Risk management in Trading

When it comes to cryptocurrency investing or trading, there is always risk involved as the cryptocurrency market is very volatile and heavily influenced by a lot of factors which means that no prediction is 100% certain and the market can anytime go against any price prediction. This is where risk management comes into play because it is basically a strategy that helps a cryptocurrency trader or an investor to reduce risk and in turn make the most profit.

In trading or investing, there is no set out formula as nothing is certain most especially in the cryptocurrency market. There is always pros and cons in ever strategy used by traders that is why every trader have their own strategy that works for them. For me, when it comes to risk management, I focus on stoploss, risk/reward ratio, take profit, investment portfolio and risk capital.

Stoploss

Stoploss is a very good risk management strategy and I make use of it in trading any cryptocurrency asset. Because of the highly volatile cryptocurrency market which is heavily influenced by a lot of factors, stoploss is very important to help reduce loss if a trade goes against my prediction. I like to set my stoploss not too close my entry price but at the same time, not too wide from my entry price. This is because when the stoploss point is too close to the entry price, there is a big chance that it will get triggered when there is a sharp drop and rise in price. Also, if the stoploss is too wide, there loss will be greater if the market continues to fall and triggers the stoploss.

I always try to find the right balance when setting my stoploss. Trailing stoploss is also another amazing feature because it helps me to always retain profit even if the market begins to fall. I start with the regular static stoploss when entering a trade, and when the trade is in profit, I change to a trailing stoploss to always preserve profit while also riding the upward movements to any limit until the market reverses and my trailing stoploss would trigger and preserve the profit.