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Investing in Сryptocurrency. How to reduce the risks?

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Investing in cryptocurrency

Investing in cryptocurrency. How to reduce the risks?

Investing in cryptocurrency is considered risky because the digital asset market is highly volatile. It is recommended to use special tools that reduce the likelihood of loss of investment.

Cryptocurrency is a highly volatile asset. When investing in cryptocurrency there are always risks of losing your savings. Investors use different tools to help reduce these risks, such as diversification. By dividing the investment portfolio into assets with low correlation, it is possible to secure investments from fluctuations in quotations. There are other ways that can help reduce the risks when investing in cryptocurrency.

Avoid Haste and Greed

During periods of high volatility and rapid growth of cryptoassets, traders start trading on emotions. Uncertainty, fear of lost profits (FOMO), and greed lead to this. Active trading during such periods can lead not only to a large loss of funds.

FOMO is short for Fear of Missing Out. This term refers to situations where the fear of missing out on opportunities or some valuable resource becomes the reason for certain actions.

In order not to become a hostage to the market, you need to formalize a strategy for yourself in writing and simply follow it, and after a while, determine the results and adapt it. Even a simple table, which will indicate the moment of entry, the estimated period of the investment, the expected result, and the exit option, will be enough to not so chase after lost profits.

Don’t use a large leverage

In an effort to earn $ 1 million here and now, with a deposit of $ 1,000, investors use x100 leverage, and sometimes even more. In this case, one corrective candlestick that does not change the intraday trend is enough – and the deposit is lost.

For the crypto market, the x3 leverage is already a quite high risk, while the 10x-20x leverage can work well in the foreign exchange market. Cryptocurrency trading with x3 leverage is available on the Bitxmi crypto exchange.

Risk hedging

In some cases, leveraged trading can be used as a hedging instrument. For example, if after buying bitcoin for the long term, the price of an asset began to fall, you can open a short position with small leverage and thus win back the losses.

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Disclaimer: Bitxmi News is a news portal and does not provide any financial advice. Bitxmi's role is to inform the cryptocurrency and blockchain community about what's going on in this space. Please do your own due diligence before making any investment. Bitxmi News won't be responsible for any loss of funds.

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