Top Crypto Risk Management Strategies You Need to Know

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If an investor wishes to become successful within a short duration by focusing only on one crucial skill it is risk management. This article talks about importance of risk management and how crypto investors can implement it.

What is Risk Management?

Every type of investment is attached with a certain amount of risk associated with the trade. There is a potential for investors to lose their money in case of unfavorable market changes, defaults, credit risks, moral hazards and others. Therefore, every successful investor learns and adopts risk management techniques.

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Risk management is part of the trading strategy that enables an investor to identify, quantify, and mitigate risks associated with a given trading positions. Risk management is considered one of the most important skills associated with investing.

Risks Management for Crypto Investors

Every financial market has a different dynamic for associated risks. At the same time, a risk for an investor is also subjective to their unique position when trading. Cryptocurrency are often known for their massive volatility and thus investors in this arena must adopt the specific set of risk management techniques that are most suitable for them.

It is not suitable to try to apply the risk management strategies applicable on other investment products on the crypto market such as Forex and stocks etc.

Top Crypto Risk Management Strategies

Here are some of the top risk management strategies that crypto investors can adopt:


The environment for cryptocurrency trading is very different from traditional markets such as stocks and commodities. Cryptocurrency trading depends heavily on social media platforms therefore the news travel like wildfire and have instant market reaction. The term DOYR or Do Your Own Research is popular among crypto investors.

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It encourages investors to take their time and confirm every news source at the same time make sure that the news they are considering as basis for decision making is authentic and reliable.


There are thousands of cryptocurrencies available in the crypto market. Most of them are accessible to people around the globe. It is easier for cryptocurrency investors to diversify their portfolio and follow the principle of avoiding putting all eggs in one basket.

Diversification lessens the danger of sustaining losses on account of loss of momentum in one or a few crypto tokens.

Risk Assessment

Risk Assessment is a type of individual examination of risk appetite and tolerance for loss. In the world of investment, investors are incentivizing to earn greater profits as they are willing to take bigger risks. However, it depends on the budget and profit goals for every investor that how much risk they are willing to take.

Therefore, it is best to set realistic profit goals and place trading bets on the basis of how much loss a trader can sustain without drowning in debt or suffering from massive losses.

Market Development

As mentioned before, crypto markets are known for their reactive nature on account of news spreading rapidly through social media channels. Investors must make sure that they are aware of all the instant market changes that are taking place in the market place and they must be able to predict the impact of a new development on the price of crypto coins present in their portfolio.

Therefore, it is important to follow verified accounts of key organizations and persons on social media platforms to stay updated.

Cyber Security

Investors should include background check and technical soundness of a given crypto project before investing. It is best to check the news and other sources to find out any history of lags, downtime, or exploits in a token issuing network in advance.

Stop Loss and Take-Profits

Stop-loss is a threshold to dissolve a trading position if the price falls below buy price. Likewise, taking profit is trigger for cashing out once the price crosses the required profit goal.

These are simple technical instruments that can help the investors achieve their profit targets and avoid sustaining massive losses without actively monitoring the price movements.

Trading Psychology

Taking profits, buying a new position, holding a given investment reserve, and analyzing the market are all activities performed by humans.

Therefore, their perception can be subjected to emotional interference on their decisions. Therefore, professional investors train themselves to have a strong psychological constitution.

Trading Style

Traders can go for short-term or long-term trading strategies. At the same time, they may opt for spot trading or delve into the derivatives market. Investors have the option to use margin trading or leveraged positions and they may also employ short or long positions. It all depends on the nature and personal trading style of an individual investor.


When starting out, investors can hire consultants or work with brokers to make sure that their trading decisions are guided. However, consultants charge fees for their services.


Risk management is the key to crack the puzzle of investing. The most successful investors have the ability to access their risk tolerance and the risk associated with a given trading position with closest possible accuracy. Therefore, risk management is also very important skill for cryptocurrency investors.

Author: Isacco Genovesi

Isacco writes news articles, reviews and guides about cryptocurrencies including technical analysis, blockchain events, coin prices marketcap and detailed reviews on crypto exchanges and trading platforms.

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