Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Crypto Losses: How to avoid them?
Nov 15, 2022
Image: Pixabay/WorldSpectrum
Despite its popularity in recent years and proven way for people to earn passive income, cryptocurrency has always been controversial. Like any other type of investment, cryptocurrency is considered the riskiest due to the market’s high volatility and unstable value of the cryptos. The fluctuating behaviour of the market allows traders and investors to either earn high profits or lose their hard-earned funds. Losing assets can be pretty standard in the investment industry, but it’s essential to take action to cut down your losses. To do this, you must be aware of the risks of investing and learn how to control them. Read on to learn about tips on how to avoid crypto losses.
1. Learn How To Manage The Risks
Investment and risks are deeply associated with each other, as every venture that involves money always comes with difficulties. Managing risks is easier said than done; there are a lot of things in crypto that you need to learn and understand. Luckily, platforms like this website connects traders to the most reliable brokers have made the life of traders and investors more accessible and secure.
Managing the risks means detecting warning signs and dangers in trading and being aware of the opportunities you might miss. If you know how to manage the risk, you’ll be able to control yourself from the margin of buying and selling. Diversifying your portfolio is also one of the best ways to mitigate the risk. Combining alternative coins with low correlation factors may help you get through a sudden market crash.
2. Use Technical Analysis Tools
Whether you’re a beginner or not, using Technical Analysis tools can be extremely helpful. Technical Analysis tools assist traders and investors in reading charts to understand the market’s behaviour. This strategy allows traders to make rational predictions or estimations of a specific crypto’s price in the following years. With its proven effect, technical tools are one of the essential tools that every crypto trader or investor must have.
However, experts have mixed comments regarding the use of Technical Analysis tools. Some recommend using it only for short-term trading opportunities instead of long-term ones for an effective result. Technical Analysis tools also work best if you’re trying to identify the entry and exit positions in crypto investment.
3. Avoid Fear of Missing Out (FOMO)
When you are a crypto trader or investor, especially if you are a beginner, it’s normal to want to stay updated with the latest events and trends in the cryptoverse. However, jumping in and learning too much information is not always good. When the crypto market suffers from volatility, there are moments when traders panic and make rash decisions that they will regret later on.
When it comes to buying and selling cryptocurrencies, some traders commit wrong decisions and choices because of fear of missing out or FOMO. It’s essential to learn how to control yourself and not fall victim to FOMO to avoid impulsive decision-making. Always research before deciding and double-check every piece of information on legitimate sources.
Image: Pixabay/WorldSpectrum
4. Invest Wisely
Before diving into cryptocurrency, you should learn about the golden rule of investing: Do not invest more than what you can’t afford to lose. Remember that cryptocurrency is prone to suffering from price fluctuations, and the amount you’ll lose tomorrow may be more significant than what you’ve earned today. There’s no certainty in cryptocurrency, and every value of cryptos you read is purely based on predictions and speculations.
The most important thing you should learn is not to invest all your funds in cryptocurrency. But if you have extra cash, experts recommend investing it in different cryptocurrencies. Diversifying your portfolio is deemed to be a more innovative move than showering one cryptocurrency with your digital assets. This move decreases the chance of going bankrupt and increases the likelihood of earning income.
5. Accept and Move Forward
One important rule in life that can be applied to cryptocurrency is that when you make a mistake or suffer from a downfall, you just have to accept it and move forward. An error is inevitable and irreversible, so dwelling on it and thinking of things you could have done would not change the result. So, you should accept it, analyse where it went wrong, and learn from your mistakes to know how to approach the situation next time.
See: Lessons from crypto winter (so far)
When buying cryptocurrencies, you must do extensive research about your top chosen cryptos and how they can be beneficial to your career. In addition, you must look forward to opportunities and possibilities that may happen in the future if you make this decision.
Image: Pixabay/WorldSpectrum
Conclusion
For many years, cryptocurrency has been known to have a highly volatile nature. Along with the long list of crypto millionaires who made profits from crypto trading or investing is an even longer list of people who were unlucky enough to benefit from this field. Whether you are a beginner in crypto or an advanced one who wants to learn some tips, it’s essential to know the measures you can take to protect your assets to minimise losses.
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