- Trade carefully when buying or selling cryptocurrency. Strategic planning is key to responsible trading. Creating a trading strategy today can help you accept responsibility for future actions.
- Making trading judgments when relaxed helps you avoid emotions. Avoid FOMO, do your research, grow your assets, and use stop-limit orders.
- Be aware of all possible consequences before using leverage in trading. Binance provides tools like the Cooling-Off Period to regulate trading volume. This feature suspends future account access for a set time.
Make sure you’re being a responsible trader, no matter how much money you have. You can only trade with money you can afford to lose by following some basic recommendations and procedures. It’s easy for some individuals to go excessive. Read our guide to learn how to better control your trade, set appropriate boundaries, and become more responsible in general.
The meaning of “responsible trading”
Being a responsible trader in cryptocurrency involves more than just keeping track of your purchases and sales. Instead of having your emotions guide your trading behaviours, you should take charge. You must accept responsibility for your actions and learn whether or not your trading strategy is successful.
Investment and trading options for cryptocurrencies are different. Futures and margin trading are two alternatives that offer the possibility of high rewards via leverage but also carry a higher level of risk. Some investors may struggle with knowing how to use them properly. Depending on your comfort level with risk, you may be better off buying cryptocurrency on the spot market and HODLing it indefinitely.
Responsible traders will refrain from engaging in actions and behaviours that increase the risk of making a bad transaction. Knowing when you might be vulnerable to emotional or cognitive biases is crucial for trading crypto ethically. Trading successfully is a talent that develops with time and through practice; inexperienced traders often trade on emotion or predictions. You should take every precaution to prevent this.
How to Trade Cryptocurrency Safely: 8 Suggestions
Responsible cryptocurrency trading calls for discipline across a wide range of trading behaviour. The option to purchase or sell is only the beginning. Make an effort to implement as many of the suggestions as you can. It’s a lot of tips to take in, but they’ll help you become a better trader.
Secure your money and trading account.
Protecting your trading account is a must before you begin trading. If your money, account, or password are stolen, it won’t matter how carefully you planned your trades. You can do this in several ways, such as by implementing two-factor authentication (2FA), using strong passwords, and adding withdrawal addresses. To make sure your cryptocurrency is SAFU, we’ve collected 15 Tips to enhance the safety of your Binance account.
The same guidelines for your private key apply if you use an external cryptocurrency wallet. Just like with your bank account information, you should never give out your private key or seed phrase to anyone else. Choose a digital wallet from our recommended BNB Smart Chain wallets based on your requirements and desired level of safety. If you’re able to do so, a hardware wallet is a great way to keep your spare cash secure.
Make a trading strategy
Making and sticking to a trading plan is the best way to keep your emotions in check. This way, unexpected gains or losses, rumors, FUD, fear, uncertainty, and doubt won’t derail your plans. What, then, constitutes a trading strategy?
You should specify in your plan the nature of the trades you intend to execute, the market conditions under which you intend to trade, and your overall trading goals. What you can risk and how you trade will determine your boundaries. Create your trading strategy with a level head, and you’ll be more likely to stick to it when the time comes. To help you in your trading, you can:
- How much, if any, leverage do you want to use
- The costs of entering and leaving individual trades
- Maximum allowable investment of capital as a fraction of total
- How diversified your investments are
- Transfer of your crypto assets
- When to stop trading (time, volume, etc.)
- The worst possible results
- The items you buy and sell
Use stop-limit orders
Stop-limit orders are easy to set on Binance, providing you with additional trading control. Cryptocurrency is uncertain, therefore, you should always monitor your investments or risk losing money. Stop trading crypto properly by leaving large amounts sensitive to market swings. Once set, stop-limit orders help you stick to your trading plan.
For example, you invested $15,000 in Bitcoin (BTC), which is now worth $40,000. If the price declines, don’t sell for less than $30,000. This will give you $15,000. Stop-limit orders do this automatically.
The initial stop price is $32,000, which you set. At this price, your limit order activates. If your stop price is $20,000, set a limit price of $30,000 to sell 1 BTC for at least $30,000.
Leave some gap between the stop and limit prices to increase the likelihood of filling your stop-limit order. Your order may not be honored if the market goes below your limit price without a gap.
Stop-limit orders may not always be filled, but you will always get the provided price or more. What Is a Stop-Limit Order? Stop-limit orders and how to use them.
Do your own research
We recommend studying beyond Binance Academy and Binance Studies. Always double-check your conclusions with additional sources from your own research DYOR.
Use an exchange to purchase and sell cryptocurrencies and Decentralized Finance (DeFi) goods for financial transactions. Your risk tolerance and investment portfolio are unique. Prior to trading or investing, make sure you understand your finances.
Diversify your investments
Portfolio variety is crucial to any trading approach. Having only one or two baskets is riskier. Spreading your risk across asset types increases returns.
First, select how to distribute your crypto holdings. You can diversify your DeFi holdings through liquidity pools, staking, derivatives, stablecoins, and other cryptocurrencies. Spreading losses across crypto asset classes reduces their impact. Staking gains can offset impermanent losses from the liquidity pool in which you invested.
After that, diversify within each asset category. Stablecoins like BUSD, USDT, and PAXG reduce portfolio risk. These are only examples. There are ethical ways to play out our cryptocurrency portfolio.
Many investors have FOMO. You should be careful how it changes your behaviour. Fear of missing out on investment opportunities may cause you to act hastily. Due to the internet, social media, and other modern communication methods, we are more exposed than ever.
Though the internet might help you locate exciting investing opportunities, be aware of scams. Users who promote their coins or initiatives for profit do so regardless of their value. False information from scammers will exploit traders’ fear of missing out. If you’re worried about missing out on a new opportunity, do your research before investing.
There are numerous stimuli that can bring on feelings of “fear of missing out.” Knowing their identity can assist you in identifying their motivating factors.
Twitter, Telegram, Reddit, and the rest of the social media world are full of trolls, fake news, and alternative facts. Do what you think is right. Scammers may prey on your fear of missing out (FOMO) by using the fact that many influencers are compensated to promote projects and altcoins.
It’s human nature to want to be too risky with money after a run of prosperity. Inflating your own abilities might lead to poor decision-making. A healthy profit may make you feel like you’re missing out on other “big” investing opportunities.
The desire to recoup your losses can worsen your FOMO. In extreme cases, fear of missing out might lead someone to take a losing position, exit, and then re-enter the trade. Both of them have the potential to result in far larger losses.
Gossips And Rumours
Hearing about potential investments from other traders or on the internet can be exciting. It is important to do your own study and analysis before acting on any rumours, investing advice, or suggestions regarding a popular cryptocurrency.
Large swings in either direction offer profitable trading opportunities. It’s easy to get carried away in the cryptocurrency market, whether you’re longing for the price to rise or shorting during a slump. You could also be catching a falling knife if you invest in a bearish market, thinking it’s a good time to buy.
The concept of leverage
The thought of using leverage such as margin or futures to achieve more profits can be appealing. But if your losses are magnified as well, you run the risk of being dissolved and losing your entire investment very quickly. When done properly, liquidation can be a useful tool. However, smart trading does not involve losing more money than you planned for or taking unnecessary financial risks. Make sure you have a firm grasp of the mechanics of leverage before putting it to use.
Many people are familiar with the concept of leverage as a multiplier, such as 10x, which would increase the initial investment by 10 times. With leverage of 10:1, your initial $10,000 investment becomes $100,000 in trading capital, and your starting capital balances any losses. If your trading account balance drops to zero, the exchange automatically closes your trades.
It is possible to abuse the use of leverage in trading. You should study Coin-Margined Futures and USDT-Margined Futures thoroughly to understand the dangers involved because they are significantly larger. Limiting the leverage of Binance for new users to promote safe trading practices
Exchanges, like everyone else, need to exercise responsibility when conducting business. Binance takes responsibility for advising traders to make their own choices. You should always use proper risk management measures and conduct your own research while trading anything, including digital assets, securities, or commodities. Binance Customer Support is available if you’re experiencing stress from your trading, losing more money than you can afford to lose, or both.