Trading In Crypto? Here Are Top Five Risk Management Factors

Charlotte Miller

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There is no doubt the crypto trading platform often remains highly volatile. Therefore, the chances of suffering losses are high. Moreover, due to newness and legal problems, the risks involved in this trading are huge and quite detrimental for your assets. No matter how suitable the strategy is or how smart you make the trades, having a risk management plan will come in handy. Cryptocurrency trading is done based on speculations. Therefore, everything is measured in terms of the probability that increases the market’s volatility. So, unless you have proper knowledge about the risk management strategies, you won’t block the blows from hampering your trade positions and holdings. 

Therefore, the following article will focus on some of the most important strategies and plans to help you manage all the trading risks and reduce the chances of suffering losses. 

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Carry out analysis with multiple time frames

Often traders rely on just a one-time frame to analyse the crypto market. Even though it’s less of a challenge, monitoring only a single frame is very risky. This is because the crypto trading frames are independent of each other. Therefore, if your chosen one has a negative price movement, another frame may be a positive approach. 

That’s why considering multiple frames and monitoring the crypto prices, and their movements is a good idea. Applying this strategy, you can then minimize the risk of making a loss transaction and putting your assets at stake. Furthermore, with more than two-time frames under consideration, you will better know how the market behaves. 

Important cryptocurrencies should be researched: Before investing in any cryptocurrency, make sure you do your homework and only invest what you can afford. Investing only because you feel left out or without speaking with an investment expert is not recommended.

Understand your reward/risk ratio: The reward to risk ratio is the amount of money you stand to gain for every unit of currency you risk. Invest after evaluating your risk-taking capacity.

Diversify your portfolio: Investing in many cryptocurrencies might assist in reducing risk. A well-diversified portfolio reduces the risk associated with investments. Because investment is spread among several coins, the effect of volatility may be mitigated. Some crypto coins are more volatile as compared to others.

Determine your entrance and exit strategies: Your trades’ entrances and exits are critical components. A solid entrance is a cherry on top of a winning transaction, however, with exits, you must weigh both profits and losses. This is one of the most important risk management strategies that you require to plan your escape points.

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Always implement the stop-loss feature

As the “Stop Loss” name suggests, you can understand that stop loss is a kind of order passed by a trader when the price of a particular share will not be in favor for a long time now. With the stop-loss order once passed, you can easily prevent further losses and manage your assets easily. 

However, stop less needs to be triggered only under certain conditions like an increase in supply but a decrease in demand, a high liquidity at a particular instance, a negative price movement approach, etc. 

This will help you reduce loss and minimize the risks easily. Also, it will become easier for you to have more profits as all the currencies won’t behave similarly. This is why not rely on only currency type if you truly want to evade the risks. 

Analyzing the profits and losses

You also need to understand the profits and losses of your past transactions and the current market trends. If you forecast a positive price movement, you won’t have to deal with the trading risks. But in case the movement has a negative approach, it will become challenging to prevent losses unless you have a risk management strategy. 


It is no doubt investing in cryptocurrencies has many more risks than investing in conventional securities, however, the investment risks of legacy assets cannot be equated with those of crypto assets. Because the nature of various asset types is so distinct, they must be examined in their proper context.

Finally, If you are concerned about finding out an appropriate platform where you can make the most out of your trading journey in cryptocurrency, you can look out for exchanges like Auto-Trading Robot . And when coupled with risk management strategy, we hope that if you face any loss, it wouldn’t be too much that can leave you crippled.