Risk Management Idea

Crypto markets are crazy but do not let them make you crazy! Look first then jump. Neither this post nor any other on cryptofal.com should be taken as financial advice. It is not.

One of the best ways to mitigate risk is by diversifying your portfolio to not have all of your eggs in one basket. Although it should also be noted that the entire cryptocurrency market moves in correlation with Bitcoin. If Bitcoin is up the market, in general, is usually up as well, and the same works the other way. With total market corrections like we have seen recently just being diversified will not save you. The next part of risk management is knowing when and where to take profits so you are not paralyzed as to what your next move should be. You do not want to sell when the market is red unless you really need the money for real-world issues, that is when you want to buy more if possible. You need to make your trades with conviction.

Let's say that you have a portfolio of Bitcoin, Ethereum, Cardano, Solana, and Avalanche. You can make a list from high-low based on which ones you have the most conviction for or feel the most confidence in. This way when the markets are in free fall you can trade out of the token you have the least conviction in and put that money in the one you have the highest. The idea is that if you have the most conviction in Ethereum then you also assume it will not drop in price as much as whichever you are the least confident in. Now when the market has bottomed and seems to be coming back around you can move that money back into another play or just keep the extra profits you make when your best play inevitably recovers.