Trading cryptocurrency requires a disciplined approach to risk management and security. Start by using reputable, centralized exchanges that offer two-factor authentication and cold storage options for assets. Never store large amounts of capital on an exchange. Move long-term holdings to a hardware wallet, which keeps private keys offline and protected from online hacking attempts.
Position sizing is critical for capital preservation. Limit individual trades to 1% to 2% of your total portfolio value to prevent significant losses during market volatility. Use stop-loss orders to automatically exit positions at predetermined price levels, which helps remove emotional decision-making from the process. Avoid using high leverage, as it can liquidate your entire account balance during minor price fluctuations.
Conduct thorough research on projects before investing. Analyze the whitepaper, the development team, and the tokenomics to understand the underlying utility. Diversify your holdings across different sectors to reduce exposure to any single asset failure. Always remember that cryptocurrency markets operate 24/7 and are highly speculative. Trading involves substantial risk of loss, and you should only invest capital that you can afford to lose entirely.
How this answer was produced
AI-assisted draft, human-reviewed by AlphaScala editorial against our standards before publication. General education, not advice for your specific situation.