In cryptocurrency trading, as well as in other forms of trading, emotion and risk management is of salient importance. While technical analysis is indubitably grave, such fundamental analysis is also essential to fare better in trading.
In short, adept emotion and risk management possibly lead to a more secure trading. This also applies to cryptocurrency trading, in a manner of trading without any unnecessary haste.
Apparently, despite its importance, people tend to take these for granted. Ergo, it is no wonder that, at many occasions, people only make small profits or break even. Even worse, many often lose.
To avoid such calamity and, subsequently, to perform better, it is crucial to understand the basic of how to manage emotions and risks in trading. Considering its necessity, here are steps you should try to do so.
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Managing Your Emotions
Emotion management is closely relevant to psychology in trading. In order to situate an appropriate psychology, it is important to realize several, arguably widespread, facts about trading itself.
First and foremost, it is worth noting that markets are volatile. Thus, an abrupt temptation to trade, in most cases, leads to poor choices. In other words, greed and minimum calculation drive the temptation to trade soon.
Secondly, it is always advantageous to rely on trading journals. By relying on your personal trading journals, you can reflect upon your previous trading mistakes or gains, and plan your next steps.
Last but not least, suppressing your emotions in trading is important. Bear in mind that cryptocurrency is arguably a good investment. However, nothing good comes out of it if you invalidate the price, volume, news, and trend.
Managing Risks
Risks exist, that is for sure. Furthermore, each time you trade, you always exposure yourself to the risks. To minimize the risks, it is wise to never put everything you have on one trade and consume your living allowance to do so. Cryptocurrency trading is never a gamble.
To manage risks, the basic way is to contemplate over your trading results. Afterwards, you can decide what to do next and, sometimes, conducting trial and error is a must.
For instance, if you often break even, it might signify that your strategy works. However, that can also mean that you lack of courage to put bigger sum. You might not be able to cover your trading fees if you keep your current strategy.
If you often generate a small income, it is, to some extent, a good progression. However, generating small incomes too often might indicate that you are too hasty, or in other words, you are having ‘weak hands’.
Meanwhile, if you often lose, there might be something wrong with your risk management, You should plan everything from zero and educate yourself more about the trading psychology.
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