Rain · Buy & Sell Bitcoin, Ethereum, and more in the Middle East
Rain · Buy & Sell Bitcoin, Ethereum, and more in the Middle East

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How to limit losses and maximize profits in crypto trading—Rain Diaries #3

Yayın RAIN EDITORIAL TEAM - May 23, 7:00 PM

Crypto trading with its tempting returns can often blind investors and make them do moves they wouldn’t even think of otherwise, like placing all their funds into one asset, or ignoring the risks involved. It’s notoriously hard to recognize when one is falling into the same trap, so today, we’ll explain exactly how to reliably limit your losses and maximize your profits when trading crypto.

Why buying only one asset doesn’t work for many

The times of placing all your available funds into one crypto asset have passed for good, as most investors realized that it’s not a sustainably profitable strategy. In fact, it is among the worst choices you can make as a trader, as in most cases, your asset will underperform the market average no matter which token you picked.

The reason why is simple: the crypto market is among the most connected industries of all, meaning that assets’ performance actually has an effect on each other’s valuation. Thus, price movements are pretty steady all across the board, meaning that by diversifying and acquiring more assets, you actually stand the best chances in reaching your goals. However, this is not all that is needed for that, we are missing two key elements crucial to anyone’s success, namely risk and cash management.

Risk and cash management: the essence of success

Risk and cash management are the two most vital elements of successful trading, simply because they have the biggest influence on profits and losses. This can sound surprising for some, who could argue that choosing the right asset is the most important thing of trading. While it is crucial to invest in what you believe in, in terms of profits, risk and cash management are superior.

Nonetheless, these terms are easier to implement than you’d think. Risk management is simply making sure that your portfolio is diverse enough, and you’re not getting greedy when profits, or losses, are rising by setting “stop-loss” and “take profit” levels. Cash management means that with every trade, you only use a certain small size of your total available funds, and make gains step by step instead of placing all into one or two moves. For instance, one strategy could be to only use a maximum of 10% of your funds for one trade, which is the suggested top percentage in this regard for those just starting out.

Limit your losses by setting a stop-loss to every crypto trade

A stop-loss is among the best ways of limiting your losses. With it, all your trades will have limited downside, which is unheard of in the crypto world. To set it, simply determine the maximum negative percentage you’re willing to lose on your trade, which is suggested to be no more than 10% for beginners, and sell your position if this number is matched. It can be hard to be consistent with this, but most professional traders use this to succeed for a reason: it works. Bottom line is, set your stop loss, and sell if it’s met no matter what; then move on to your next trade.

Maximize your profits by activating a take profit for all crypto trades

Take profit is on the other side of the story, where you predetermine the gains you’re aiming for prior to trading. For instance, you could target around 20-25% profits, depending on the timeframe of your trade. Once it’s reached, however, try not to become greedy and adhere to your take profit level by selling your assets. This way, you are more likely to consistently secure gains, which will ultimately add up to be a hefty amount at the end of the day.

Risking it all with one crypto asset is the thing of the past, and the new trend is rational investing with proper risk and cash management. That is, setting your stop-loss and take profit levels, following them, and diversifying among more crypto tokens, especially when you’re just getting started. Join the movement, and start becoming sustainably successful today.


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