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Trading and investing is not only about making money; it’s also about protecting your trading and investing money. However, many traders and investors choose to focus their attention on the making aspect while ignoring the protection side of the equation. It’s vital to understand that by putting all your eggs in one basket, so to speak, you increase your risk of having your eggs broken.

It’s no secret that cryptocurrency markets are notoriously volatile, and more than once they have wiped out weeks of (and sometimes months of) gains in mere days. Because of that, many traders are reluctant to put their real money into it; instead, they use demo accounts or trading bots that trade for them. Others hedge their trading investments by shorting cryptos like bitcoin on exchanges like BitMEX.

Take Only What You Can Afford to Lose

If you can’t afford to lose a trade, don’t take it. Taking every opportunity may sound like good trading practice, but if you use OCO (one cancels other) orders, you may find yourself taking trades that will cause you more pain than gain. Don’t take a trade unless it passes your risk/reward test. You also want to avoid emotional decision-making; set guidelines for yourself and stick with them.

Set Stops When Entering Trade

When you enter a trade, set an appropriate stop loss point. Then, try not to watch your positions too closely or obsess over your profit and loss. Since you’ve already defined where you’ll exit a position if it doesn’t go as planned, there should be no need for anxious monitoring. Why? Because if your exit point has been set appropriately, then it’s unlikely that your trade will turn out as badly as you expected.

Don’t Take on Too Much Risk

Learning how to manage risk is essential for every aspiring trader. When you’re first starting out, it can be tempting to go big—taking on as much risk as possible in order to reach your trading goals sooner. But, if you take on too much risk right off the bat, you could end up hurting your chances of ever succeeding at all. Don’t rush things; learn how to manage your capital safely before putting it all on one big bet.

Make Sure You Understand Risk Management.

The number one priority for every trader is risk management. Before you begin any trading strategy, be sure that you have a sound understanding of how much money your strategy will likely cost you if things go wrong. There are two main factors that come into play when managing risk: leverage and volatility.

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