Risk and Risk Management [Part 2]

Hello crypto lovers. Trust you're super good today. Am Happy to be back in your faces once again. Hope you enjoyed our last discussion on Risk and Risk Management. Am sure it will be an eye opener for many as they are getting to see the topic from another stand point.

In today's post, we would be going deeper into the already established topic on risk and risk management. We would be looking at how to manage these risk. We discussed several types of risk investors are exposed to in the market but we didn't talk about how to manage them and that is what I want to address today...do enjoy this ride with me.

---

Risk Management strategies

---

Here we are friends, let's get to explore some very key risk management stategies. What we are about to discuss is not all there is but trust me, they are very germane, I mean, very important. Lets get into it right away.

---

• Diversification

Can we actually overstress this point? I believe NO. I kinda wonder why I even started with this point...smiles. yeah friends, you need to learn to diversify your Crypto portfolio because of the several risk faced in the market as investors.

It's more like spreading your tentacles. Another way to explain this is with the English adage that say...."do not put all your eggs in one basket". The reason is not far fetched, you could lose all of it if something unexpected happens.

^freepik

As investors, this is the mindset we need to have. Trade could go wrong, the market could go south, the unexpected could happen to the asset which you have acquired with your all. But when you spread your holding and acquisition, you can only feel a little of the heat and not all of it. Your mental health is tied to your holdings, so be wise.

---

• Always apply Risk/Reward Ratio

Well if you're a trader and not just holding some long term asset, this point should resonate with you. You need to understand the importance of risk/reward ratio. Maybe you've not been practicing your trade with this strategy...you just need to pause and get this right if you want to save you portfolio from potential reck.

Risk reward strategy simply helps to program your risk and reward. The idea behind it is knowing how much you are willing to risk to get your desired profit and then you put it in a ratio form. It is important to know how much you're risking to get whatever profit you're aiming at.

Take for example 2:1 R/R, this by a wise trader simple means he is risking 1 to get 2. It further means that the potential reward reward on the trade to be taken is twice the risk of taking that trade.

There are several R/R strategies which is based on how good a trader is... Some always like to raise the bar.However a small careful trader would like to start on a 2:1 risk reward ratio.

---

• Set Stop Losses On Your Trades

Stop loss is actually a vital tool when trading the crypto market. It actually help to put an end to an ongoing loss just as the name implies. Many a times, trade might go contrary to what we planned or envisage such that instead of profit, we are seeing loss...

This is where stop loss comes handy, it is programmed to close the trade automatically when the loss get to a particular point/price level set by the trader. Setting stop loss means the trader is not ready to entertain loss beyond certain level if the trade goes south.

^freepik

No one should be too confident and neglect this rule, it might cost the so called trader his whole portfolio for being negligent. So stop loss is one of the vital risk management a trader should always put in place to avoid stories that touches the heart.

---

• Avoid Excessive Leverage

Leverages are very good but then it's important to know that it's a two edged sword. You could be in massive profit with the use of leverage and on the flip, you could also be in huge loss...I mean complete loss which could go as far as blowing up your portfolio.

For example a leverage of 100% could make a normal gain of 2% into 200% because of the Leverage parameter of 100% and this is the same in he case of loss, if things go south, your loss would be in the reverse order as well.

Let the use of leverage be as moderate as possible, don't get overly excited and carried away by some potential profit on the strength of leverage. Use small leverage so that your risk can be properly managed.

---

• Have a good Entry and Exit Strategies

Every experienced trader have their entry and exit strategy. They do not enter the market blindly, they take calculated steps. They open a position when they are sure and have done their analysis and then close the position in line with their trading plan.

The market sometimes can be funny, if you're not careful, you might get swayed by the happenings in the market so much that you would find yourself deviating from the original plan. Sometimes greed might set in...in that you might have hit your desired profit target but then you find yourself craving for more profit which could end up spelling doom for such

We have discussed five points already, although this is not all there is, there is actually so much more we can dig out if we take our time to research but then the points shared are really important. I hope to share more along side other aspect of this topic when am privileged again.

---

Conclusion

---

There you go friends.I would love to wrap it up at this point. I want to believe you've gotten so much from this piece. As my usual custom is, I would always encourage that you DYOR to be sure of every financial step you would want to take as I won't be liable for any form of loss encountered by you.

Feel free to share with me your thoughts in the comment section. Thanks for your time once again. Gracias!

---

^{Disclaimer: This post is made as an education and not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your own research and consult a financial advisor.}

---

Regards
@lhorgic♥️

---