During periods of high volatility, the risk of losing money increases significantly. Experts named the solutions that will help traders to secure the deposit.
Bitcoin price on December 4 collapsed by more than 20% for a day and for the first time since the end of September fell below $42 thousand. This led to the mass liquidation of traders’ positions for $2.5 billion. RBC-Crypto experts gave recommendations to help reduce risks when cryptotrading in a period of uncertainty.
Place stop-loss orders
In a declining market, a stop-loss order is essential, according to Mikhail Karkhalev, a financial expert at the cryptocurrency exchange Currency.com. He recommended using stop-loss orders to protect your funds always, regardless of the market situation, because impulsive pullbacks can also occur during active growth.
A stop-loss order is a type of pending exchange order to automatically make a transaction to sell or buy an asset when the market price reaches a given threshold value.
According to Karkhalev, stop-loss is a flexible tool that allows you to not only limit the possible losses, but also to close the position to breakeven or fix part of the profit.
“Pulling up the stop-loss, as profits on your position grow, will eventually allow you not just to limit losses, but even to lock in profits in any case,” the analyst added.
Investigate the reasons for the changes in the cryptocurrency market
When the market is volatile, Cryptorg CEO Andrey Podolyan advises against succumbing to irrational emotions. He says that now it’s a situation when it’s better to leave the market for a while. It is possible to start thinking about deals when bitcoin has a good level of support, Podolyan believes.
“Then there should be a price consolidation and a good accumulation. Only then you can start thinking about cryptotrading,” the expert explained.
It is not worth opening new positions now, because after the collapse of bitcoin to $42 thousand and its consolidation above $50 thousand, there is still a risk of another wave of decline, says Podolyan. According to his estimates, the accumulation period in the current conditions may last about a month.
Reduce the risk factor
The current market phase is characterized by high volatility, which increases the risk of losing money, explained the head of the analytical department of AMarkets Artem Deyev. In his opinion, it is difficult to predict when this period will end.
To wait out the period of instability with minimal losses, it is worth reducing cryptotrading, leaving positions only in the largest digital coins, such as Bitcoin and Ethereum, says the analyst. A more conservative approach should reduce the share of cryptocurrencies to 10-15% of the entire investment portfolio, Deyev added. According to him, with stabilization and the emergence of some pronounced trend, it is possible to gradually increase the volume of investments in other digital assets.