Introduction
Trading Crypto responsibly when buying or selling cryptocurrency should be your primary goal. Proper planning is a big part of trading responsibly. Making a trading plan can help you be more accountable for your decisions in the future.
It’s great to practice to make sure you’re trading responsibly, regardless of how much you’re buying or selling. You may eliminate excessive risks and ensure that you’re only dealing with what you can afford to lose by using easy guidelines and strategies. It’s easy for some folks to get carried away. Read our guide to set your correct limitations and enhance your overall responsibility if you want to understand how to manage your trade better.
What is meant by trading Crypto responsibly?
Trading Crypto responsibly entails more than just keeping track of your purchases and sales. Rather than acting on emotions, you should be in control of your trading behaviour. You must also accept responsibility and determine whether the trade activity you are engaging in is genuinely beneficial to you.
You can invest in or trade cryptocurrencies in a variety of ways. Futures and margin trading, for example, can generate significant gains through leverage, but they are riskier. Some traders may find it challenging to use these in a responsible manner. HODLing and buying bitcoin on the spot market is a safer alternative that may be more appropriate for your risk profile.
Responsible traders will avoid the kinds of actions and behaviours that lead to irresponsible trading. Recognising when your decision-making may be negatively influenced is crucial for trading cryptocurrency ethically. This ability takes time and practise, and it’s usual for rookie traders to deal rashly or rely on gut instinct. The more you can stay away from it, the better.
Trading cryptocurrency responsibly necessitates a thorough understanding of a variety of factors. The buy or sell button isn’t the beginning and finish of it. Try to include as many suggestions below into your daily routine as feasible. It may appear to be a lot of advice, but it will assist you in improving your trading abilities.
Ensure the safety of your trading account and wallet.
Before you start trading, the best thing you can do is safeguard your account. If your funds, account, or password are compromised, it doesn’t matter how carefully you arrange your trades. Using two-factor authentication (2FA), choosing a secure password, and whitelisting withdrawal addresses are just a few options.
MAKE A TRADING STRATEGY.
The easiest method to avoid allowing your emotions to influence your trading is to devise a strategy and stick to it. In this manner, you won’t be swayed by unexpected gains, losses, rumours, or FUD. So, what exactly goes into a trading strategy?
Your strategy should include the types of transactions you intend to make, trading conditions, and trading goals. Your risk profile and trading style will determine the limits you set. You should make your trading plan with a clear mind and be willing to stick to it afterwards if necessary.
STOP-LIMIT ORDERS SHOULD ALWAYS BE USED!
When trading Crypto responsibly, it is essential to use stop-orders. Stop-limit orders are a simple way to get more control over your trade. Please see our Level 3&5 Accredited courses for in-depth trading strategies. You can’t be glued to a screen all the time, and with cryptocurrency being so volatile, you could end up with unexpected losses. It’s not a reliable method to trade to leave significant sums of Crypto unprotected from volatility. Please stick to your trading plan once you’ve established it. Stop-limit orders are simple to utilise once you’ve set them.
Consider the case where you bought 1 Bitcoin (BTC) for $15,000 (US dollars), now worth $40,000. If the price drops, you want to make sure you don’t sell for less than $30,000. You’ll make a profit of $15,000 as a result of this. You can use a sell stop-limit order to automate this process.
Begin by setting a stop price of $32,000. This is the price at which your limit order will be triggered. You then set the limit price to $30,000, implying that your 1 BTC will sell for $30,000 or more if the stop price is achieved.
Your stop-limit order has the best probability of filling if there is a gap between the stop and limit prices. Without a gap, the market price could go below your limit price, resulting in your order not being filled.
It’s important to remember that a stop-limit order isn’t always guaranteed to fill, but when it does, you’ll always get the price you specified or better.
DO YOUR OWN INVESTIGATION INTO YOUR TRADES.
Validate and double-check any information you obtain by conducting your own research.
This recommendation applies to both trading and investing in coins on exchanges and using Decentralised Finance (Defi) tools. You are the only one who knows your risk profile and what is appropriate for your portfolio. Make sure you understand where you’re placing your money before you start investing and trading.
Diversify your investment portfolio.
If you decide to make a trading strategy, include portfolio diversity to reduce risk. It’s risky to have only one or two assets in your portfolio. As a result, you can diversify your portfolio by investing in various assets from various asset classes.
You can start by establishing your asset allocation in crypto. You might put your money into Defi liquidity pools, staking, derivatives, stablecoins, and altcoins, among other things. Therefore, you are less likely to suffer significant losses if you limit your exposure to a single crypto class. For example, you may suffer a temporary loss from a liquidity pool in which you’ve invested. Still, your losses will be offset by staking gains.
Avoid FOMO (fear of missing out).
FOMO (Fear of Missing Out) is a typical experience for many traders. However, you must be cautious about how it influences your actions. Fear of missing out on a lucrative investment opportunity can lead you to disregard your trading limitations and make hasty decisions. We now have access to an enormous amount of information through the internet, social media, and other forms of communication, making us all vulnerable.
A variety of factors can cause FOMO. Recognising them might assist you in recognising the triggers.
Twitter, Tiktok, Reddit, and other social media sites are full of rumours and incorrect information. Doing your research is usually a good idea. Scammers may take advantage of your FOMO to steal your funds, as many influencers are paid to promote projects and altcoins.
Gains: If you’ve been on a winning streak, it’s easy to get carried away with your profits. You could also be overconfident in your abilities and make poor decisions. Even if you’ve achieved a substantial profit, FOMO in other “huge” investment prospects may increase as a result.
Losses: As you try to make up for your losses, your FOMO may intensify. Due to FOMO, you may even enter a trade, quit after losing money, and then re-enter the position. Both of these scenarios have the potential to result in significantly greater losses.
Gossip and rumours
Gossip and rumours: Hearing about an investment from other traders or the internet can make it look appealing. On the other hand, rumours, investment advice, or suggestions for a popular cryptocurrency should never be used as a substitute for thorough investigation and analysis.
Volatility: Large price swings in both directions offer profit opportunities. It’s easy to get carried away in the cryptocurrency market, whether you’re buying and hoping for a price increase or shorting the market in a slump. An adverse market may appear to be an excellent investment time, but you may wind up catching a falling knife.
Realise the power of leverage.
The concept of borrowing money on margin or trading futures to achieve bigger profits can be appealing. However, because your losses are increased, you risk being liquidated and losing all of your capital quickly. Liquidation isn’t always a terrible thing if you keep it within your bounds. However, losing more money than you intended or taking too much risk is not considered responsible trading. Make sure you understand how leverage works before you start utilising it.
You may have seen leverage expressed as a multiplier, such as 10x, which means your initial capital is multiplied by ten. Your starting cash is used to cover your losses, and $10,000 leveraged 10x offers you $100,000 to trade. The exchange liquidates your trade after your capital runs out.
Allow for a cooling-off period.
When things aren’t going so great, take a break. We all have terrible trading days, but the goal is to keep those bad days to a minimum. Get away from the computer, go for a walk or take a break from trading for a few days.
Trading Crypto responsibly and with discipline is the only way to become a successful trader !!
