We are going to take advantage of this space to the new seedlings. Yes, that same! For those who are still starting this journey of investing in cryptocurrencies or other assets.
On the other hand, we know that some people have no idea what to do in certain cases, and we also know that some of our expert investors is starting to see the cryptocurrency market and therefore they also need help to positively understand this new market.
So, recently, mercadobitcoin wrote a very interesting article where talks about several tips that we must take when doing risk management. The truth is that it is a very important issue, when it comes to investments, regardless of the type. Therefore, we have translated it and we are going to share it with our vision, and we will complete the information with other important articles.
What Is The Risk Management?
In the world of finance, risk management refers to the practice of identifying potential risks in advance, analyzing them and taking precautionary steps to reduce/curb the ris, as is detailed in economictimes.indiatimes.
In order to minimize and control the exposure of investment to such risks, fund managers and investors practice risk management. Not giving due importance to risk management while making investment decisions might wreak havoc on investment in times of financial turmoil in an economy. Different levels of risk come attached with different categories of asset classes.
In particular, we here at “Rubika Ventures” recognize the great importance of risk management. That is why in each trading signal or in any investment recommendation, we already send what is the maximum, of the total capital, how much will be the percentage of investment within the operation.
So, take these heartfelt tips to improve your risk management.
Assemble The Whole Position At Once
It doesn’t matter how much experience you have in the cryptocurrency trade. The worst strategy is to buy everything at once. First, it increases the chances that you will regret, and end up selling in the event of a fall.
There are investment strategies that work with stop loss. However, it is unhealthy to spend all available money at a single point of entry. If the investor leaves room for maneuver, he can make new purchases at lower prices.
Another problem with buying everything at once is to favor the impulsive, unplanned act. A well-designed strategy must have the element of volatility, the sudden change in price, so it is not recommended to try to hit a single entry point.
How to avoid this error: The ideal is to buy a little each week, spreading over a few months. If you plan a shorter-term trade, it is recommended to place purchase offers forming a “step ladder”, dividing into four or five stages.
Measure Risk Incorrectly
When investing in Ethereum, for example, fluctuations of up to 15% in a single day are normal. This is due to the uncertainties that exist regarding the cryptocurrency market, both in terms of growth potential, as well as eventual failures and delays in development.
The main indicator used by traders is volatility, although it is possible to analyze manually by the daily variation of cryptocurrency in recent months. Some tools like investing.com and cointelegraph.com allow you to view this information very simply.
That is, for each investment, the average daily range of price fluctuations must be known beforehand. For this reason, it is essential to make purchases in installments, benefiting from possible falls instead of being frightened by normal market movements.
How to avoid this error: Learn to diversify your portfolio, applying part in fixed income, seeking a lower risk and return, while the rest is free for applications with greater earning potential, for example, cryptocurrencies.
Faithfully Follow Recommendations From Others
It is tempting to think that some more experienced trader or analyst will spend points of purchase and sale guaranteeing some return in the medium term. Think about it: if this person really had this power, why would he sell the information to others?
No group of signals, technical analysis tools, or trade courses can provide a method that guarantees indefinite returns. It is possible that for some time it will show positive results, as the market itself was in a certain trend, however, this varies a lot.
In the long run, an investor tossing a coin to decide whether to buy or sell is likely to get the same return from these tools and groups. Another strategy often used to deceive is to display only those assets that have given good returns, or periods in which the system has worked.
How to avoid this error: Courses and tips from more experienced traders and analysts are valid for you to develop and adapt your own methodology. Even so, it will be necessary to make constant adjustments and learnings in order to deal with new market dynamics. Do not trust others blindly!
Clarification: the advice is clear. Even we recommend placing the trust of your investments in third parties. Therefore, our work is rigorous and well thought out, to avoid too many losses. We really want you to make a profit while you learn and for that reason, we know that many of our subscribers will wonder why we don’t send trading signals constantly like other groups do. The answer is simple: our method is different and thanks to that we have obtained good results.
Important note: because of the above, it should be noted that each time we send an investment recommendation, please always take due time to study what we have sent. Remember, before profit comes confidence that the path to threshing is clear and safe. So always trust your faith first, then you, and as a third method, our previously done study.
Quickly Vary Between Fear And Rush
It may sound silly, but the psychological one is what most experienced traders lose money. Some err on the side of overconfidence, skipping steps or exceeding the desired risk. Others, in times of insecurity, end up dismantling the position before reaching the planned stop loss limit, or stop buying more during the upward trend.
In this market there are even specific expressions for these emotions.
Fear of being left out (FOMO, from the English fear of missing out): when the trader was not positioned in an asset that is rising a lot; for some reason he imagines that it is necessary to buy urgently, so as not to miss the high.
Fear, uncertainty and doubt (FUD, from English fear, uncertainty and doubt): the known fake news, or news that may have some truth, but without proof; it usually happens when there is an unexpected drop in crypto, and the investor himself questions whether he made the correct decision.
The experienced trader knows the importance of cold and calculating planning, but is able to recognize when the situation has changed, or that the investment thesis itself was wrong.
How to avoid this error: Avoid following all the tips that appear on social networks. It is normal to have a more optimistic group, while others predict the worst.
Focus on developing a methodology that works for you, training and improving each month.
A personal experience: never of the never, we wanted our group to become fraudulent to FOMO, FUD, PUMP, DUMP and derivatives schemes. We know the high risk that this compromises. That is why we simply want to be a financial publisher as well as infomoney, the capital, coindesk, and among others, but with a differential that many are knowing. At this point, it is very important to recognize the difference between risk and safe position.
A joke: We know that many of our subscribers have already made fun of us because we have lost many opportunities from one day to the next, but our joke is the following; every time we study those lost positions (speaking in terms of opportunity) we always end up discovering that they were programmed schemes. Therefore, do not despair and as we have said on several occasions, patience rewards.
Expect Some Form Of Monthly Income
If you need a certain monthly income, most risky assets are likely to make up a small portion of your investment portfolio. It is not possible to extract any guaranteed income in the cryptocurrency trade, company shares, in addition to gold and oil commodities.
For this reason, it is so important to discover your investor profile, which is determined not only by your risk appetite, but also by your ability to make new investments, or the need for regular withdrawals.
Do not believe in any magic formula or “investment fund” in cryptocurrencies that guarantees a fixed monthly return. Watch out for scams!
So we personally do not promise much. We promise with the duty to study the market and send indications with a good percentage of success. But for us it is clear that this is not a fixed income per month. These are variable investments over time.
About Investor Profiles
Most errors are due to lack of planning. Not knowing the characteristics of cryptocurrency, entering without a defined strategy, or even the unrealistic expectations of earnings. It is important to understand that progress occurs through small mistakes and successes, a constant learning that fits your investor profile.
What Are The Profiles Of Investors?
To invest your resources consciously, you need to recognize how you would like to invest your assets, understanding what you are looking for when investing your income. With that in mind, we have listed some types of investor profiles to improve your understanding of the financial universe and its ways of operating. Check out!
Conservative
This type of investor prefers to be safe when investing their income, looking for the exact notion between profit and risk. Generally, it does not accept capital losses and does not tolerate market fluctuations, accepting lower gains to preserve its assets. Examples of investments for the conservative profile: Tesouro Direto, CDB and Fixed Income Funds.
Moderate
It has a bolder profile to diversify its investments and is willing to take more risks in exchange for a higher return than traditional applications. Generally, this type of investor has a greater understanding of the gains and risks of financial operations in the medium and long term, seeking to expand their profits beyond the basic market rates. Examples of investments for the moderate profile: Moderate shares, Multimarket Funds and Debentures.
Dynamic
Investors with this type of profile are tolerant of fluctuations in the financial market. In general, he already has practical and theoretical experience with other types of applications and is accustomed to the casualties of the market, looking for superior profits with linked risks. In the dynamic profile, there is no desire to slightly overcome inflation or retain capital in a savings account. They want to receive high returns, understanding the variations in gains and losses in each transaction. Investment examples for the dynamic profile: Shares, Post-Fixed Rates, Crypto and mutual convertible investment in startups.
Hodlers
Believing in the profit potential of crypto assets, the Hodlr profile (a term confused by the word “Hold” by a user of the bitcoin.talk forum) features an investor who keeps his digital assets, especially bitcoin, kept in his wallet, avoiding any type of movement, even with great opportunities for return.
Crypto Traders
In general, this type of profile already has a greater understanding of the traditional financial market, performing several short operations with crypto, receiving a reduced profit in each application. They study and practice at all times with graphic analysis and order books.
With the above, it is clear that recognizing our personal type of trader or investor is also part of the comparative table for good risk management.
See you in the next story! With love 💛 Rubika Ventures® Team!
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