Bitcoin trading has become one of the most popular methods to earn money. It is highly accessible as anyone can trade bitcoins over the Internet, but you must keep one thing in mind that is a risky thing to do. There are several risks involved in bitcoin trading, and if you want to get successful as a trader, you need to manage them effectively. Some of the most useful tips for managing the risks are mentioned in the following paragraphs.
Stay aware of the exchange risks
The bitcoin market is full of profits, but at the same time, it also has some risks that you need to be aware of. There are several bitcoin exchanges, but you cannot trust all of them as a single mistake can make you lose your bitcoins permanently. Bitcoin transactions are irreversible, so you need to be highly careful while using them. It has become common for exchanges to be hacked and the users losing their funds. So, if you want to avoid all these risks and keep your funds safe, there are few tips that you can follow;
- The first and most important thing that you need to keep in mind is that never keep your bitcoins with an exchange. Bitcoin exchanges do allow you to store your funds with them, but it is always risky, so it is better to avoid doing that.
- You should not use the same exchange forever, as it is necessary to diversify your coin with different exchanges. Moreover, you must choose an exchange that has a good reputation as it will offer better safety.
Avoid using leverage in excess
Leverage is an excellent tool for bitcoin traders as it allows them to maximize the order size with great ease. Leverage is beneficial only when it is used in the limit as you can use it in excess; it will increase the risk of losing all your money due to the forced liquidation. Different bitcoin exchanges offer a varying amount of leverage that goes up to 100X, but the more leverage you will use, the bigger risks you will have to face.
So, the right thing to manage the risks is to use leverage only up to 3X. It will help you to increase the profits and will provide you with enough time to exit the trade if something goes wrong. You can check the regulations on bitcoins in turkey to learn about the cryptocurrency world. It is highly important for the ones who want to hold their trade for a longer duration.
Choose quality over quantity
Most bitcoin traders think that the more they will trade, the higher profits they will earn. It is not true, as quality always matters more than quantity. So, if you want to trade bitcoins with minimum risks and earn maximum profits, you must focus on quality instead of quantity. You cannot always trade quantity as there are different types of market conditions, and each one of them requires a varying trading strategy. For instance, scalping is better for stable market conditions, whereas Swing trading should only be done during strong trends in the market.
If you want to make quality trades and make profits, you must choose a bitcoin trading style that fits all your needs and requirements perfectly. Adding to it, you also need to keep an eye on the market conditions and ensure that they are suitable to your goals and objectives.
Don’t be greedy
Bitcoin prices keep on fluctuating, and along with them, the hype in the market also keeps on changing. If you want to manage the risks involved in bitcoin trading, you must not make the trades according to the hype in the market. Following the hype will bring quick changes in your emotions, which will consequently affect your trading decisions. Emotions like greed and fear will make you panic and force you to make a wrong decision. So, for better risk management, you must need to have some control over your emotions so that you can make accurate decisions and earn good profits.
Hype is the peak of the market, and you should never trade during the hype. When the market is at its peak, it is obvious that sooner or later, it will crash. So, you must enter the market at the starting of hype and exit at its peak.