The act of trading cryptocurrency can seen as a probabilistic activity that can either make you rich or poor. It is just not guaranteed.
When it comes to the crypto business, you will get punished(lose money) for everything; even if you made good decisions, get disciplined, or being confident, or not. You will still lose money as it is inevitable. Losing money is just part and parcel of the business.
With over 2 years of experience trading cryptocurrency, the most important factor is a constant Risk Management. In this article, I will show you 2 tips you can use and manage risk and get a profitable cryptocurrency trade.
1. Know the difference between trading and investing
What's the difference between trading and investing?
It is pathetic seeing most people venturing into cryptocurrency trading without any prior knowledge of what they are going into.
Investing is simply the buying of an asset or security at a relatively cheap price and selling it off at a higher price over a long period of time usually 1-5 years. On the other hand, trading is the buying or selling of a security or asset and expecting to profit during a price fluctuation in a short period of time.
Based on my experience, it is more effective to make money investing than trading due to things tend to fall in place over a long period of time for a valuable asset being bought at a relatively cheap price. While trading is much riskier because there’s no guaranteed return on investment in the short run. Having known this, you need to ensure you allocate your capital wisely.
2. Capital Allocation
This can be seen as simply setting your capital for investing and trading purposes.
Given that investing is guaranteed and easier, then you will need to allocate more capital to it. Whereas, as trading is more riskier, you should allocate just a low amount of capital. The allocation of investing and trading should be ion the ratio of 70:30.
N.B: Do not store your investment capital on a cryptocurrency exchange, this is because when eventually your trading goes south, you may become emotional and easily take your Cryptocurrency investment and begin trading which is usually not going to produce a positive result.
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