1. Introduction

At the time of writing, cryptocurrency is in a bit of a slump, much like the rest of the global financial market. Yet interest in cryptocurrency continues to grow, and its potential has not been slowed despite various setbacks. If it becomes a very prominent feature of the global economic landscape, it could be argued that it all started with Bitcoin. In 1998, a paper was published under the pseudonym of “Wei Dai,” a computer engineer who proposed a new form of money that used cryptography as the control mechanism (Dai, 1998). It is widely believed that this paper is what inspired the development of Bitcoin some ten years later. Bitcoin was publicly released in 2009 as open-source software, and from there it quickly gained traction and interest. This prompted the development of alternative cryptocurrencies, such as Litecoin, Namecoin, and Swiftcoin, to name a few. These are referred to as “altcoins.” From 2013 to 2017, there was a boom in ICO (initial coin offering), which is a means for cryptocurrency development teams to raise money by offering newly issued tokens in exchange for Bitcoin or other established cryptocurrencies. This funding mechanism created further diversification of the cryptocurrency market and drew more interest from the public and various industries.

Cryptocurrency has become a major subject of interest in recent years. Essentially, it is a form of digital or virtual currency that uses cryptography for security, is decentralized, and generally functions outside of central banks. This is in addition to a few defining characteristics such as lack of government control, no single point of failure, and the ability to perform pseudo-anonymous transactions. It is because of these defining features that cryptocurrency has the potential to gain wide usage in the modern world, and as such, this guide will seek to provide a detailed understanding of what it is, how it came to be, and where it’s going.

1.1. What is cryptocurrency?

Cryptocurrency is a type of digital currency that uses cryptography for security and anti-counterfeiting measures. Public and private keys are often used to transfer the currency from one party to another. It’s decentralized and as a result, it’s not controlled by any government or financial institution. The transaction fee is generally low, and as a result, one of the benefits of this currency is that it’s often seen as more cost-effective than using traditional fiat money. Another feature of this currency is that due to its decentralized nature, the user doesn’t have to go through a localized bank and can instead have complete control over their money. This is good for anyone who uses a bank account to hold fiat money and in countries where the money system isn’t the most stable, such as Argentina, where they’ve undergone a currency devaluation and capital controls in the last few years. In inconvenient cases like this, having money in a foreign account in a stable currency can be used for emergency money in a bank and won’t incur a high fee for switching between the currencies. Finally, one of the most enticing aspects of cryptocurrency is that it’s designed to be a transparent system that’s free of corruption. The only problem now is that the value of the world’s most popularly used fiat currency is around $8 trillion, while the value of the most popular cryptocurrency (Bitcoin) is around $5 billion. This is less than 1% – not bad for something that’s only been around for less than a decade!

1.2. Brief history of cryptocurrencies

The first form of digital money arrived in the middle of the 1980s. The American cryptographer David Chaum conceived an anonymous cryptographic electronic money called ecash. Later, in the early 1990s, Chaum implemented his ideas in the creation of Digicash. It was not at all like modern cryptocurrency; it relied on software that was supposed to be installed on the user’s computer and on servers. The key feature of Digicash was anonymity, using Chaum’s blinding algorithm. In 1995, after getting their act together for secure communication, the NSA produced SHA. It was the first time the US government tried to create digital money. In 1996, US researchers created an e-money called “Digicash.” It posed itself as a secure transaction system, but soon the NSA found a way to track “anonymous” digital money. The company could not withstand this pressure, and in 1998, Digicash declared bankruptcy. At the same time in the UK, another attempt to create centralized digital money appeared, a company called Mondex. At the beginning, it was a prepaid card-based electronic money, but the firm changed to digital cash issuance that took place on the card. As a result, the project survived for no more than 10 years and was taken off the field in 2014. The next 10 years were relative to the “wild west” for digital money. There were no significant achievements towards the creation of the perfect digital money, in relation to existing fiat money, in any of its forms. A step forward was made in 2009 when an anonymous programmer (or group of programmers) published the Bitcoin P2P protocol and software on the internet under the nickname Satoshi Nakamoto. He declared that he was working on a new digital money system based on proof of work. This statement turned out to be a revolution in the concept of digital money. In 2011, other existing cryptocurrencies began to grow alongside Bitcoin. Known projects like Namecoin, Litecoin, Devcoin, and Ixciting have made a lot of altcoins to Bitcoin’s one, but none of them have achieved the success or popularity of Bitcoin. Today, there are hundreds of different cryptocurrencies, and their expansion is determined only by the person who has the desire to create one.

1.3. Importance of crypto in the modern world

Cryptocurrencies have been a hot topic in the modern world since their introduction around 2008. With the rise of the internet, the decrease in paper currency, the globalization of currency, and the prevalence of virtual banking, the idea of an intangible currency has become more and more relevant. But why cryptocurrencies? Is this just another fad, or is this something that could change the world as we know it? For the most part, cryptocurrencies utilize what is called “blockchain” technology. There will be a more in-depth explanation of blockchain in a later section, but for now, think of it as a way to store and keep track of a currency’s value. Usually in modern times, this is done in a centralized manner (i.e. there is a server somewhere with all of your bank account information stored, which can be accessed whenever you make a transaction), and this can be susceptible to security breaches and can be a point of failure for the currency. By using blockchain technology, cryptocurrency can use a decentralized value store. Since the value of a cryptocurrency is not reliant on a central source, it can make a currency less prone to failing. An example of a failed currency would be the German Mark during World War 1. Because the value of the mark was directly tied to the amount of gold the government had in its reserves, after the war started and the gold started disappearing, the value of the mark inflated to the point where it was practically worthless. Having a decentralized value system makes cryptocurrencies less prone to inflation of the currency value, and in some cases can actually be designed to never inflate in value. This is especially useful for sending money to other countries, since converting between different currencies can often incur high fees and exchange rates. If more countries adopt a cryptocurrency of some kind, it could become a universal way to send money internationally. Imagine how much easier it would be to give money to someone across the sea if the value you sent them was the exact amount they were able to receive.

2. Getting Started with Crypto

An alternative method would be to use a hardware wallet, which stores your keys in a protected hardware device. This is the most secure way to store your currency, but the devices are known to have a higher cost. Finally, you can use a paper wallet which involves printing out your keys and QR codes in a document and disconnecting the computer, leaving no trace on the internet of your keys.

There are several types of wallets that provide different ways to store and access your digital currency. Wallets can be broken down into three different categories – software, hardware, and paper. Software wallets can be desktop, mobile, or online, and are further broken down into client-side and third-party wallets. Using a software wallet, you can retrieve your currency by accessing the private keys through an encrypted connection to the internet. A mobile wallet is run from an app and is useful for easy accessible spending money. Online wallets allow you to access your funds from any device from any location, however, your funds and keys are all stored on a third-party server and are thus easily accessible to hackers. Therefore, online wallets are best used for smaller amounts of spending money. A third-party online wallet can also act as a means to exchange your currency for a different type, for example, trading bitcoins for litecoins. Due to these characteristics of software wallets, they are not the most secure way to store your currency.

An absolute necessity to getting started with crypto is having a wallet. Although it is called a wallet, it doesn’t exactly function the same as the leather fold you keep in your pocket. Rather, a cryptocurrency wallet is a software program that stores private and public keys and interacts with various blockchains to enable users to send and receive digital currency and monitor their balance. Your wallet will not actually store your cryptocurrency, rather your funds will always be visible in the blockchain, secured under your public and private key.

A vital part of starting your crypto journey is understanding the basics such as what a wallet is, what your keys are, and how to keep them safe. In the next section, we’ll be covering these beginning aspects of using a wallet and how to keep your currencies safe.

2.1. Choosing a cryptocurrency wallet

Finally, paper wallets are a very secure and long-term method of storing your assets, where the wallet’s details and keys are printed or written onto paper. This massively reduces the risk of the wallet being hacked and assets being stolen, but if the paper is lost or damaged, the assets are gone forever.

Hardware wallets are made for those who are not intending to use their assets on a daily basis but wish to store them long term and keep them as secure as possible. They are called hardware wallets because your assets are stored on a physical device, which must be connected to a computer to access them.

If you’re into trading often and making daily transactions with your crypto assets, you will need a wallet that is both secure and quick to access. In this case, an online or mobile wallet may be best for you.

Mobile wallets are useful for those who wish to have access to their assets on the go, to make easy and fast transactions on a daily basis. Though they are more secure than online wallets, there is still a risk of hacking if your mobile device is a victim of malware.

Online wallets are best for those who wish to make online transactions as and when they please. They are quick and easy to access, though not as secure as the other types of wallets due to the risk of potential hacking.

Cryptowallets are vital tools that allow crypto traders to efficiently store and utilize their assets. There are many different types of wallets, created for different purposes. These include online wallets, mobile wallets, hardware wallets, and paper wallets. Depending on what you intend to do with your crypto assets, there is a different type of wallet that is most suited to you.

2.2. Understanding public and private keys

Failure to store private keys securely can result in the loss of the cryptocurrency, and there is no way to recover it. These days, many wallets provide a simple means of backing up keys. It’s important to consider that the loss or theft of a device where keys are stored (e.g. computer, mobile) is effectively the same as the loss of the keys. In this situation, key loggers and other malware are a big security risk. Ideally, store only a small amount of cryptocurrency in a digital wallet for day-to-day use. High-value storage should be done using an alternative method, most commonly an offline or hardware wallet.

From a technical standpoint, cryptocurrencies are not stored anywhere. Instead, they are accessed using a pair of keys: public and private. These keys are stored in digital wallets and are used to sign transactions in order to prove ownership. Public keys can be thought of like an email address and will often be shared with others to allow them to send you cryptocurrency. A public key can be derived from a private key and is used to generate an address. The address can safely be made public and the cryptocurrency sent to this address. A private key is a string of letters and numbers that acts similarly to a password and is used to access the currency at the address or to send the currency to a different address. It’s important to note the difference here: the address is like a bank account number and the private key is like the pin for the account.

2.3. How to securely store your crypto assets

Ideally, you will want to store your cryptocurrency in an environment that is not connected to the internet yet still maintain the ability to view the value of your assets. There are multiple ways to achieve this with varying degrees of security and convenience. For instance, you could take a computer that you do not use for the internet, disable the network interface, and run a watch-only wallet. A watch-only wallet allows any address generated by the wallet or imported to it to be monitored without needing the private keys to that address. This is a great method for securing access to your funds for long-term purposes. If you want to remove funds from cold storage, you will need to import the private key into an online wallet (not recommended) or a hot wallet, make the transaction, then immediately remove the funds back into cold storage.

This is a crucial subject many overlook. Utilizing the above methods in determining what cryptocurrency to invest in can be vital in how you should be storing your assets. For smaller liquid assets, hot storage may suffice. This can be as simple as keeping your assets on the exchange you purchased them on because the exchange provides liquidity, security, and ease of use. In contrast, cold storage would be defined as storing your assets offline, whether that be on a simple desktop computer not connected to the internet, on a piece of paper, or a hardware wallet. These methods are used to insulate your digital assets from hacking or malicious activity online.

2.4. Setting up two-factor authentication

Two-factor authentication (2FA) is an extra layer of security for an online account. It works by requiring two forms of verification to log in. It is commonly something you know (account password) and something you have (your mobile phone), although there are other factors that can be used as well. Using 2FA can lower the probability of your accounts being accessed by unauthorized users because it provides an extra barrier for entry. Mobile-based 2FA is preferred to other forms for logging onto online accounts because SMS and authenticator app-based methods usually provide higher levels of security. For cryptocurrency exchanges and online wallets, setting up 2FA is recommended. Most exchange accounts will store personal information and/or funds from bank accounts that may be vulnerable to access. Furthermore, if 2FA is already being used for banking or PayPal accounts, it is worthwhile to maintain consistency in security across all platforms. In the event that a cryptocurrency investor becomes subject to an attempted hack on their exchange account, 2FA can act as an imperative fail-safe if login attempts are made and the investor is alerted regarding unauthorized access.

3. Investing in Crypto

If you are just a coin holder and not a day trader, the same ‘buy low, sell high’ principle can still apply, it is just timing that will differentiate the strategy. Day traders will look to benefit from volatile price swings and try to time the market. This can be very risky and can cause high losses for people who are inexperienced. For the more casual trader, it may be wise to set benchmarks for price points and only re-evaluate your position if the price reaches these points. This can help to avoid panic selling and buying.

Whichever investment strategy you choose, the basics of all investments are to buy low and sell high. Not many people will tell you when they think the price is high, so determining the ‘low’ and ‘high’ can be quite difficult. One way of doing this is evaluating the coin’s intrinsic value and looking to invest when the price is close to your evaluation for long-term growth. A good place to start is looking at the coin’s technology, idea, goals, and how it is being executed. Compare the coin to something familiar that we already know has value. For example, you could compare Ethereum to something like a Government Bond due to the smart contracts and the fact that it is a platform. It is then easier to determine that Ethereum is a good long-term investment compared to something more basic like Dogecoin.

Investing in cryptocurrency can be very profitable, but with high profits comes high risk. Cryptocurrencies are still a very new and highly volatile market, researching and understanding it is still an involvement of open interpretation. There are numerous ways to invest and a variety of different strategies one can employ. In this section, we will summarize various investment strategies as well as highlighting key considerations of the market.

3.1. Researching and analyzing cryptocurrencies

The key strategies and methodologies used within the field of cryptocurrency trading are all fundamentally centered around speculating on price movements. This is what guides traders towards either making a buy or a sell. The purpose of this section is to provide a detailed explanation about the complex nature of researching, and then making a judgment on whether to buy or sell a specific cryptocurrency. Understanding the nature of the cryptocurrency market: The cryptocurrency market is still considered to be relatively young when compared to other financial markets. This doesn’t mean the market is any less mature, in fact many new ICOs are adapting the same principles used by companies selling shares to raise capital. However, the lack of regulation and relative infancy of the market does mean that there are some stark differences between the cryptocurrency market and other traditional financial markets. Researching fruitful investments: It can be important to find out what is driving the price of a specific cryptocurrency. If you want to buy low, and sell high, then it helps to know what is causing the price to rise. Is the company behind the cryptocurrency releasing a new product? Is the cryptocurrency being listed on a new exchange? Information like this can be pivotal in predicting future price movements. To find this information, it may be necessary to do some digging. Publicly available information can be found on forums such as Reddit, news websites such as CoinDesk and CoinTelegraph, and in some cases it may even be worth looking into the company behind the cryptocurrency and finding a way to contact them. While this can be time consuming, the information gained can give an investor a solid edge in their decision making. High quality information is often a valuable commodity within the cryptocurrency space.

3.2. Different investment strategies for crypto

The first and perhaps most common strategy is to buy bitcoins now, and then sell it later. There are two ways to do this, short-term and long-term. The short-term strategy is based around the volatile price of bitcoins. At certain times, the price of bitcoins can climb very rapidly (and of course, it can also drop very rapidly). The strategy here is to buy at the right time. A few examples: When the Cyprus bank fiasco occurred, the price of bitcoins went from $40 to $266 in a very short space of time (before crashing back down). If you were to have bought $2000 worth of bitcoins at $40 (ie 50 bitcoins), and then sold it when the price peaked at $266, you’d have made near $10,000, a 500% increase. Of course, it’s not always easy to identify when is the ‘right time’ to buy bitcoins, and you can incur large losses at times too. But there is little doubt that when the price jumps up by $100 or more in the space of a few hours, it’s an opportunity for a good rate of return. The long-term strategy is generally easier than the short-term one, and can be more guaranteed to make a profit. If earning a high amount of USD is your main goal, you can simply hold onto bitcoins regardless of the price, and then sell them when you’re satisfied with the amount of USD you have. But a more diverse strategy is to try and buy and sell at different price points. This method works quite well if you have a fair understanding of when the price is going to be high or low. For instance, you can make a near guaranteed profit if you buy $200 worth of bitcoins when the price is low, and then sell them when the price is higher, assuming the variance is enough to cover the trade fee.

3.3. Risks and considerations in crypto investing

Prices of cryptocurrencies are highly volatile, and the events that take place within the cryptosphere can vary from government bans, market crashes, and cyber attacks. Due to the probability of any of these events occurring, it’s important to take into consideration the possible outcomes and likelihoods and the impact they would have on your investment. An event such as a market crash or cyber attack could have very negative results on the amount your investment is worth, whereas the effects of a government ban are more complex. Government support for or banning of a cryptocurrency can have a major impact on its adoption rate; however, one of the key selling points for cryptos is the protection they offer against inflation and capital controls. An investor must weigh up the negative impact a ban would have on the coins in question against the potential increased demand for them due to increased financial uncertainty, with the probability of the former likely to result in them deciding to sell the coins. Having built an understanding of the technology and goals of a cryptocurrency through researching and analyzing it, it is also important to take into consideration the external factors which could influence the success of the investment. This includes the strength of the coin’s community, the quality and quantity of its developers, and its marketing power. High community activity and the backing of a well-organized and passionate development team are signs of a coin with good long-term prospects, as increased development means increased likelihood that the project’s goals will be realized. The power of marketing should not be underestimated, as the crypto space is highly competitive and coins which lack exposure can often be overshadowed by competitors with inferior technology. An efficient means of determining these factors is to keep up to date with the coin in question by following its Bitcointalk Announcement, visiting its Reddit and official website, and monitoring the sentiment and activity of its community on social media platforms. While it’s important to assess the potential returns of an investment, it’s equally important to limit exposure to loss. This means being realistic about the price potential of a coin in both its success and failure scenarios and investing an amount relative to its risk. Failure to consider this often results in overinvestment into a high-risk/high-return coin, which can have bad psychological effects in the event of failure and can be difficult to recover from if it results in a large loss of capital. An investor must also consider the opportunity cost of an investment, as funds locked into one place cannot be utilized elsewhere. This ties in with investment time frames and the difference between investors and traders.

3.4. Diversifying your crypto portfolio

When diversifying your crypto portfolio, you must remember to examine the risk/return profiles of your investment assets. In an earlier section, it was stated that the risk of an asset is not determined by its volatility. Cryptocurrencies are known for their volatile price swings; however, this is a known and quantifiable risk, rather than uncertain risk which affects an asset that is reliant on another market mechanism. Uncertain risks are those such as business and financial risk that can often have a negative impact on an investment. This is where diversification is most effective. Investment in a number of assets with low correlation will result in less portfolio volatility. The more the correlation between two given investments, the risk will increase. Similarly, if investments have negative correlation, the risk on the portfolio will be reduced. Another important note is that there is a price to pay for risk reduction. Lower correlation often means less return on investment, so it is important to factor this in when diversifying to spread uncertain risk. Due to most cryptocurrencies being highly correlated with one another, it may be beneficial to diversify your crypto investments with fiat currency, stocks, bonds, or other more traditional investment assets that have a lower risk and a more stable rate of return. Diversification can often be a complex process. Binance CEO Zhao Changpeng suggested that 30% of cryptocurrency investors will opt to diversify their investments into a project of different nature so that they may help to increase the initial investment. Whether or not the investment of altcoins into an ICO counts as diversification is debatable; however, there are ways in which you can exchange currencies within your investment without creating a taxable event that would hinder your investment. This requires an understanding of like-kind exchanges of US property of IRC Code 1031; however, the issue is debated as to whether the same rules apply with different countries also offering different tax laws.

4. Crypto Trading and Exchanges

Cryptocurrency exchanges can be a bewildering place for a new investor. With first generation exchanges, most coin purchases are made through the site’s own supply at a static price. These types of platforms do not actually execute trades on an open market, and are more akin to buying currency for a video game or a foreign holiday. While this will be sufficient for novice investors and those simply looking to acquire some coins for practical use, seasoned traders and speculators will find these platforms unsuitable. The ability to trade on an open market, leverage positions and buy/sell with margin are functions more akin to stock trading and forex, and are more likely to be found on second generation exchanges such as Bitfinex or Poloniex. Third generation platforms are those which have been designed specifically to launch an ICO and get their token listed on an exchange. With the recent explosion of new ICOs, these platforms have also been growing in number. The functions of these exchanges are beyond the scope of this article, but it is important to understand what is meant by an “ICO token”.

For those new to the investment game, it’s hard to get your head around the mind-boggling variety of platforms which all serve to execute the same basic function: buy and sell stocks. To cryptocurrency enthusiasts, the inefficiency of running (relatively) simple trading functions on traditional stock platforms means a significant cut into potential earnings. Consequently, a wide range of crypto exchanges have sprung up, with a variety of trading platforms designed to execute a multitude of different functions. Understanding the differences between these platforms and what they are designed to do can save an investor a lot of headache, heartache and hard-earned cash.

4.1. Understanding cryptocurrency exchanges

Cryptocurrency exchanges provide a place for people to buy and sell cryptocurrency. They do not operate in the same way as traditional stock markets. On an exchange, a person is buying one type of cryptocurrency for another (i.e. buying Ethereum with Bitcoin), or trading fiat currency for cryptocurrency. Each exchange offers different trading options, as forms of orders and time limits. There are three main types of exchange, and each has a similar trading process. Trading cryptocurrencies is generally done with an order. An order is a trade intention, and there are many different types of orders. The most basic distinction is between a market order and a limit order. A market order is simply buying or selling at the current market price. This type of order is the quickest, and usually executed immediately, although it is possible for the price of the asset to change between the time of placing the order and it being executed, in which case the order will be filled at a different price to the one expected. A limit order is an order to buy or sell an asset at a specific price or better. This type of order is not executed immediately, and is placed on the market’s order book. When another customer’s market order meets your limit order, the trade is complete. Market orders are more simple, whereas limit orders provide more control and usually a better price. Limit orders are a basic tool for trading, and are present on every exchange. There are other types of orders such as a stop order or a trailing stop which are often useful for more advanced trading strategies. Time limits for orders can usually be set with more advanced orders, however the present default is that an order is ‘good till cancelled’, on some exchanges an unclosed order may remain indefinitely.

4.2. Types of trading orders in crypto

Once you have found a suitable exchange, you need to deposit funds to get started. At this point, it’s worth considering what you are trying to achieve. There are generally two types of trade – you either buy the currency at its current rate in the hope of selling it later for more (a long-term strategy) or you can trade ‘short’ whereby you sell the currency to buy at a later date (a short-term strategy). If you’re looking to invest for the longer term, it’s likely you’re better off with the first method of buying as you’ll incur fewer trading and transfer fees. Normally, the type of order consists of a simple ‘buy’ or ‘sell’. When you enter the relevant area of the exchange, you’ll be able to specify the amount of a certain currency you want to buy or sell. The exchange will then calculate this into the current rate and show you how much of the other currency you are purchasing. If you are happy with your trade, simply enter the amount and execute the buy. This is a market order, where you are simply exchanging one type of currency for another based on the current available exchange rate. The alternative type of order is a limit order. This is a buy or sell order where you set conditions to purchase at only a specific price. As previously mentioned, the crypto markets can be extremely volatile and there can be large fluctuations in a very short space of time. If you are looking to exchange at the best possible rate, or if you’re confident the rate will improve from the current one, a limit order is for you. Buying at a specific price will ensure you do not pay more than you have committed to the trade, and selling at a specific price, especially if it is above the rate of purchase, guarantees a profit.

4.3. Tips for successful crypto trading

Never chase a loss. It’s not uncommon for a beginner to find they have made a trade, but it hasn’t been executed and instead it has turned into a losing trade. The majority of the time the trade is then manually closed because the level of pain of seeing a trade go slightly negative is too much, and that loss becomes a big one. The novice trader’s rule is to stop out at breakeven, but that is never a good idea – just ask yourself how many times price has been to the level that the trade would be exited at breakeven and then tp to close out in profit. You’ll find it’s not that often. If a trade on a good setup has been entered at a good level, then it will usually result in a profit, if the trade doesn’t work it’s likely because the market has simply changed its mind. Always use a stop loss, it will encourage discipline in the long term and it is a necessity for the preservation of trading capital. A good measured rule is risking 1-3% of capital in any one trade. Step a stop in the breakeven once price has closed there and then look to trail it on any further strength/weakness. This simple technique just helped to preserve capital in a crude oil trade when price came within $0.10 of stopping out before turning and providing a $4000 gain.

4.4. Managing risks in crypto trading

It is a good idea to avoid trading with leverage especially if you are new to trading. While leveraged trading can make you a lot of money with only a small price movement, it can also make you a lot of money in the opposite direction. Often times, you will be liquidated before the price has a chance to move back in your favor. High volatility and leverage can easily wipe out your entire investment. It’s better to play it safe with small positions and no leverage until you are confident in your trading abilities.

The simplest way to manage risk is to set a stop loss. A stop loss will close your trade if the price moves against you by a certain amount. Stop losses are offered by many exchanges and are an essential tool for any kind of trading. Without a stop loss, you can potentially lose a large amount of money during sudden market crashes or unexpected news. It also helps to set a take profit. A take profit will close your trade at a certain price and is another useful tool for securing gains and minimizing losses. Always make sure that the amount you stand to gain from a winning trade is higher than the amount you stand to lose if the trade is unsuccessful.

Probably the most important risk management strategy is to only invest what you can afford to lose. People who invest money they cannot afford to have tied up in long term investments tend to panic when the price moves against them. This often leads to them selling at a lower price than they bought, not realizing the loss until the investment has been closed. You should already be mentally prepared for the possibility of losing the money you invest. This is the hit you must be willing to take to potentially make greater gains. If the money you have invested is not vital to your current living situation, you will be in a much better position to hold your investments through the rough times.

Risk is something that cannot be avoided in any aspect of life, it can only be managed. Crypto trading carries a level of risk just like any other method of investment. The trick is to manage the risk as much as possible in order to get the best results. Here are some important strategies for managing risks when trading cryptocurrencies.