Risk management is an important component of the success of any trader in any market. No matter how much capital you trade or invest, losses are inevitable, especially in highly volatile markets such as cryptocurrencies. Knowing how to handle risk is important to minimize losses. But it is also important to master risk management to maximize profits. The more willing you are to take the risk, the greater the potential reward.

Manage risk to prevent loss
Even experienced traders with proven experience in reading the market can lose everything in one or two bad trades if they do not use proper risk management or let their emotions get in the way. The lure of winning a jackpot or chasing market sentiment can be very strong, leaving traders confused or overconfident.

To prevent large losses and allow traders to trade calmly, they should at least use the simplest trading tools and forms of risk management. This includes the establishment of trading rules such as market orders, restriction orders and stop loss orders that allow traders to limit their losses by triggering an action when certain conditions are met.

By using these mechanisms, traders can take a break from the screen and trade with confidence, knowing that they can limit losses or make a profit at an acceptable level. The ceiling will depend on the investor’s willingness to take risks and how much capital they are willing to lose on a particular trade.

Another way to manage risk is of course the golden rule: Always maintain a diversified portfolio spread over several assets. This will give you access to more assets while securing you against losses and ensuring that a failed investment does not wipe out your capital completely.

Manage risk to maximize your profits
Over the past year, we have seen astronomical growth in the cryptocurrency area, with impressive returns on most of the major currencies. Decentralized economy has revived a passion for growing crops and generating attractive passive income from cryptocurrencies, as well as creating an entire ecosystem for loans and lending from traditional economies. Due to a tough global economy due to a global pandemic and an almost negative return on savings, investors are largely turning to the cryptocurrency area.

We have seen enormous support from institutional investors and large companies such as MicroStrategy, Guggenheim, PayPal and Square, lending to companies and encouraging the “FOMO” fire. Bitcoin (BTC) took off like a rocket this year and broke previous record highs thanks to the actions of the institutions. MicroStrategy alone accounted for more than 70,000 BTC in the last year, indicating continued upward support.

As institutional investors accept more, there is a growing need for more sophisticated risk management techniques that go beyond basic market orders and allow professional and institutional traders to implement highly flexible and creative strategies that spread risk across all assets and maximize profit potential. … …

Until now, these companies’ rated products have been out of the reach of cryptocurrency exchanges when it comes to risk management. But if we are to respond to the needs of this type of investor, reputable exchanges must provide the infrastructure organizations need, including the ability to secure their sites and manage risk more effectively.

Improved risk management to achieve maximum flexibility in trading
With features such as Unified Account Management (also known as Portfolio Margin), traders can manage all their accounts, trades and cryptocurrency groups from a single interface. But most importantly, they can gather all their assets and trade with any instrument using full purchasing power.

For example, suppose a trader wants to enter into ETH / USD futures trading. With an account, they can do this effectively without buying Ether and using the cryptocurrency they have. This is more convenient for traders and also reduces fees associated with buying altcoins with Tether (USDT) or BTC. It also allows them to take much greater risk and position to increase profits and improve margin efficiency.

Risk management is perhaps the most important part of investing. If the cryptocurrency continues to grow and attract and sustain the interest of institutional traders, we need advanced risk management tools that can increase returns to investors and drive a trillion-dollar market value.

Source: CoinTelegraph