Much like the traditional equities market, there are always corrections in the cryptocurrency market. Additionally, in the crypto market, there could be even more daily volatile movements as the new asset class matures.
Risk management is an effective crypto trading strategy that helps to cut down losses, to help crypto traders from losing all of their money. Corrections in the market are imminent so it matters how you deal with volatility.
While being a successful trader often points to making massive gains, any substantial profit could be lost in just one or two bad trades without proper risk management.
Traders who are unsuccessful usually enter a trade without any crypto trading strategies, nor the idea of knowing when to sell for a profit, and how much loss they are willing to risk. While sometimes beginners are able to gamble on a lucky streak in the crypto market, it is unlikely to be able to sustain profitability especially when emotions start to dictate their trades.
Successful traders will set their own crypto trading strategies, by planning what price they are willing to pay, and what price they would want to sell to make a profit. By measuring the resulting returns against the probability of the cryptocurrency’s price hitting their goals, if the adjusted return is high enough, the trade can be executed.
Calculating expected returns
The calculation of expected returns is essential, as it forces traders to be able to think through their crypto trades, and select the most profitable ones. Setting stop-loss and take-profit exit orders are necessary for this calculation.
Traders would usually calculate the probability of a gain or loss by using historical data of the cryptocurrency, and breakdowns from the support or resistance levels for more experienced traders, rather than trading on instinct.
Setting stop-losses and take-profit orders
A stop-loss order is set at a price where the trader will sell a crypto asset to take a loss on the trade — preventing further downside potential to avoid incurring bigger losses. As mentioned, cryptocurrency prices are volatile and are due to retrace at certain times, stop-losses are meant to limit losses before they escalate.
A take-profit order is set at a price where the trader will sell a crypto asset to take a profit on the trade. For more experienced traders, they will try to sell the cryptocurrency before it reaches a resistance level, before the digital asset consolidates again. This could also happen when traders decide to realize their profit, to secure capital gains.
Most cryptocurrency exchanges will allow you to be able to set a stop-loss, but at the same time, you will not be able to set a take-profit order, which is an issue.
Trading effectively with stop-loss and take-profit orders
A great way to place stop-losses and take-profit orders is on the cryptocurrency’s trading chart’s support and resistance levels. Many experienced traders will do technical analysis on the cryptocurrencies, which is based on looking at previous highs and lows — determining the levels of which the crypto’s price reacts to trend lines on high volume.
However, understanding the moving averages and the key levels to trade cryptocurrencies is not enough, if you do not have the sufficient tools to manage your trades.
Using an automated crypto trading platform is essential to execute your trades effectively, as most exchanges lack efficient tools.
Automated cryptocurrency trading
If you trade digital asset on exchanges, it is hard to manage your risks and at the same time make sure you can realize profits when the exchanges do not have enough tools.
What happens on the exchange is that you must wait for your initial entry order to execute, and then check your account again, then set either a take-profit order or a stop-loss order. You cannot set both at the same time, as the exchange blocks your balance.
Automated crypto trading enables you to trade cryptocurrencies without monitoring the market 24/7. No matter how skilled you are at cryptocurrency trading, crypto trading softwares such as CoinPanel could make your trading experience a lot easier.
CoinPanel is an all-in-one crypto trading automation platform that allows you to set your preferred entry and exit orders, including the initial price where you want to purchase your cryptocurrencies, and your stop-losses and take-profit orders.
CoinPanel’s platform allows you to make your own decisions ahead of time, using your crypto trading strategies, and execute them for you when the prices hit.
Since it is nearly impossible to monitor the market all day, CoinPanel automates the trades for you, based on your strategies to ensure you do not miss out on taking profits.
Rather than checking and charting crypto price levels on another page, since exchanges do not have sufficient tools, CoinPanel’s interface is integrated with TradingView, so you can look at important levels, including resistance and support, while setting your trades simultaneously.
You can also track your profit and losses on the CoinPanel platform, without using another app to input your trades manually. It’s all done for you when you connect your exchange, and trade with CoinPanel.
Check out the CoinPanel platform, and start trading better and faster.