How to Reduce Losses in Cryptocurrency Trading- A Short Guide
Traders have access to the cryptocurrency market 24 hours a day, 5 days a week. This means that they are definitely going to face risk and uncertainties every single day of the week. It is also a fact that uncertainty has an inverse correlation to comfort levels; the higher the uncertainty, the more uncomfortable you feel and this means that you are more likely to get stressed out. Now that you know that you will be feeling stressed while trading cryptocurrencies, it is best to learn how to manage it. Traders cannot eliminate it completely, but they need to figure out how to not let it affect their decisions.
How can that be done? Highlighted below are some of the ways to control stress and reduce your losses when trading an instrument as volatile as cryptocurrency:
- Have a plan
Entering the cryptocurrency market without a trading plan means that you will not be able to maintain control when the stress creeps in. When you have developed an efficient trading plan that can deal with multiple scenarios, you will be able to keep stress levels under control. Moreover, having a trading strategy and a proper plan in place can also boost your chances of achieving success. Your trading plan is based around the capital you have available, your trading goals, the time span and the amount of risk you are ready to take.
- Use the right broker
The choice of a cryptocurrency broker is one of the key steps you take when you are getting started. However, this is not an easy decision to make, even though there are numerous crypto brokers currently offering their services. The market has its fair share of shady brokerages as well due to which you have to maintain caution. Also, the definition of right broker is different for everyone; some traders want low trading fee while others prioritize an advanced trading platform. Do thorough research and you will a reliable broker like Wize Capital for your crypto trading needs.
- Take breaks
It is essential to bear in mind that not everything is going to go your way when you are trading cryptocurrencies. No trader wins every single trade; you have to lose some to win some. There are two ways you can deal with a loss- either you let it stress you out or you accept it, study it and learn from it before moving on. If you are too stressed out, take a break or else you will end up making the same mistakes again.
- Keep a record
Maintaining a trading journal is an effective way of learning from your successes and losses in cryptocurrency trading. Keep a record of all your trading activity, which includes dates, instruments, losses, profits, and most importantly, your own emotions and performance. When you review this journal periodically, it will give you important feedback that will help you in learning from your mistakes and successes. If you don’t do so, there is a good chance you will repeat your mistakes and this will minimize your chances of making profits and increase your losses.
- Use reasonable leverage
When you opt for reputable and comprehensive brokers like Wize Capital, you can expect to get leverage for trading cryptocurrencies. Leverage appeals a lot to traders because it gives them the opportunity of making large profits with a very small investment. When used properly, there is no denying that leverage does give traders room for growth. Nonetheless, it is also important to remember that leverage also has the power to amplify losses. Therefore, when you do decide to use leverage, make sure you keep it reasonable. Opting for a smaller position can limit your risk and still leave you room to earn profits.
- Consider crypto trading a business
Treating cryptocurrency trading as a business means that you will be less concerned about wins and losses in the short run. It is more important how you perform in the long run. Thus, traders will be able to feel less emotional about losing and winning and regard it as another day at the office. It takes time for a business to become profitable and the same happens when you trade cryptocurrencies.