Over the past decade, cryptocurrency experienced several rises and falls. The 2017 rise was highly prominent. The fluctuations in 2021 turned many people into millionaires.
Predicting the changes in value has been complicated. Even the most experienced traders faced unexpected fluctuations. Hardly all of them managed to get out while they still could. Meanwhile, numerous newbies managed to make thousands of dollars.
In the first three months of 2021, the price of bitcoin nearly doubled. Then it took several plunges and never recovered The entire world is watching bitcoin’s behavior closely, hoping to make even more money on its fluctuations.
If you want to invest in bitcoin today, you still have an opportunity to capitalize on its future rise. However, you need to take a smart approach to trading in order to prevent significant losses.
Explore the Stop-Loss Order
The stop-loss order can be the key to holding on to your assets while trading. It may be suitable for bitcoin as well but only in certain cases.
A stop-loss order is put in place to sell the asset once it reaches a certain price. Its key goal is to minimize the loss of a trading position in case your prediction doesn’t come true.
This commonly used order takes the emotion out of the trading equation and helps you make smart decisions. It protects traders in situations when they don’t know whether to get out of a losing deal.
Since traditional markets aren’t as volatile as cryptocurrency, stop-orders tend to work perfectly. However, when the price changes quickly and violently, a stop-loss order don’t always work. With bitcoin, the price fluctuation can reach as much as 5%. That’s why if you want to prevent losses by using a stop-loss order, you need to monitor the process very carefully.
Diversify
Bitcoin isn’t the only cryptocurrency that’s worth your attention. According to experts from the security token offering platform, Stokr, other cryptocurrencies like Ethereum and Litecoin have high growth potential.
By putting all of your eggs in the bitcoin basket, you risk losing all your assets at once. Take the time to diversify your portfolio in order to support your revenue. You can add some META 1 coin to your holdings, which will make a good counterbalance to the volatile currencies. Make sure to explore other investment options. For example, take advantage of the stability of traditional markets to have a backup source of income.
Work on Your Emotions
Emotions and successful trading aren’t compatible. This is especially true about cryptocurrency trading. Since bitcoin is highly volatile, each change in price can be quite emotional for the trader. That’s why many newbie investors made serious mistakes during bitcoin’s rise and fall in 2021.
By taking emotion out of the equation, it’s possible to make top-notch decisions. In order to minimize emotions, it’s imperative to manage your money properly. Never buy bitcoin unless you have “free” money. This means that your bills are paid, you have a stable job, and your emergency fund is in top shape.
If you are using a big chunk of your salary to trade, emotions are likely to interfere with your decisions.
Let it Go
The hardest thing to do when it comes to trading bitcoin is to let it go. However, in many cases, it’s a must-do tactic. When bitcoin starts falling drastically, as it did in May 2021, it’s wise to let it go.
Experienced investors let their bitcoins go at the beginning of May. The rest are waiting for a magic rebound. It’s important to understand that the last time it took this cryptocurrency several years to rise again. Holding on to all of your bitcoin investments may not be wise.
The Takeaway
The high volatility of the cryptocurrency market calls for smart decisions. To prevent losses, you need to explore trading tricks and other markets while getting rid of an emotional approach. Thankfully, bitcoin isn’t the only cryptocurrency you can work with so prevent losses by diversifying your portfolio.
