What are some ways to avoid losses in cryptocurrency trading if there's no regulation yet on this market?

No one wins 100% of the time, and the top 1% of traders in the world know this. That is why successful traders view themselves first as risk managers and only secondly as traders.

Much like the traditional equities market, there are always corrections in the cryptocurrency market. Additionally, in the crypto market, there could be even more daily volatile movements as the new asset class matures.

Risk management is an effective crypto trading strategy that helps to cut down losses, to help crypto traders from losing all of their money. Corrections in the market are imminent so it matters how you deal with volatility.

While being a successful trader often points to making massive gains, any substantial profit could be lost in just one or two bad trades without proper risk management.

Traders who are unsuccessful usually enter a trade without any crypto trading strategies, nor the idea of knowing when to sell for a profit, and how much loss they are willing to risk. While sometimes beginners are able to gamble on a lucky streak in the crypto market, it is unlikely to be able to sustain profitability especially when emotions start to dictate their trades.

We’ll go through a few tactics you may use during cryptocurrency trading to protect the value of your portfolio or wallet, prevent emotional trading, and sleep better.

Don’t be fooled by FOMO or FUD.
Due to FOMO and FUD, many people have lost their whole portfolios. FOMO stands for Fear of missing out. FUD refers to Fear, Uncertainty, and Doubt. These are the most widely used phrases in the crypto world since they significantly impact the market. People invest in terrible ventures only for the sake of FOMO and end up losing money.

On the other hand, people lose future income and their investment in FUDs. FUDs are purposely propagated rumors and negative news to influence the market. Don’t let any of them down.

Setting stop-losses and take-profit orders
A stop-loss order is set at a price where the trader will sell a crypto asset to take a loss on the trade — preventing further downside potential to avoid incurring bigger losses. As mentioned, cryptocurrency prices are volatile and are due to retrace at certain times, stop-losses are meant to limit losses before they escalate.

A take-profit order is set at a price where the trader will sell a crypto asset to take a profit on the trade. For more experienced traders, they will try to sell the cryptocurrency before it reaches a resistance level, before the digital asset consolidates again. This could also happen when traders decide to realize their profit, to secure capital gains.

Most cryptocurrency exchanges will allow you to be able to set a stop-loss, but at the same time, you will not be able to set a take-profit order, which is an issue.

Calculating expected returns
The calculation of expected returns is essential, as it forces traders to be able to think through their crypto trades, and select the most profitable ones. Setting stop-loss and take-profit exit orders are necessary for this calculation.

Traders would usually calculate the probability of a gain or loss by using historical data of the cryptocurrency, and breakdowns from the support or resistance levels for more experienced traders, rather than trading on instinct.
Don’t Chase The Price
Newbies tend to buy a coin, when they see a rising price on a chart. That’s the typical behavior of the unprofessional crowd: Getting “fear of missing out” when they see an ascending price. The expectation in crypto is mostly that price could still go x times higher from the entry point.

But often it happens that the buy level of the newbie unfortunately was short before the peak after which price will just go down again for a long time. So inexperiences traders tend to follow a wrong bias.

Treat Trading As A Business – Which It Is
You must be aware that each business has both returns and expenses. The challenge is to cut losses short and try to keep the returns significantly higher over time. A business requires that you keep track of all profits and costs, so that’s what you need to do in trading as well: Accounting buys, sells, profits and losses in a trading journal that always shows you at a glance where you stand.

Don’t Use Leverage!
Trading with leverage (borrowed money which you have to pay back including fees) is a highly risky tool and should exclusively be used by professional traders with years of experience. For people with little trading experience margin trading is really just like gambling. Before you do that, you might have more fun playing a slot machine which at least offers some fancy graphics and sounds while it is swallowing your money.

Diversify your investment portfolio.
The most excellent method is to diversify your investments. Putting all of your eggs in one basket increases your chances of losing money. Making a ratio of your investment is the best technique. By limiting your risk, you can invest in various projects or transactions. To diversify their portfolio, most knowledgeable investors opt to maintain multiple assets for the long term.

Setting realistic goals and having an exit strategy in place.
Setting realistic objectives should be a top concern since many people fall prey to greed simply because they haven’t set reasonable goals. Even if you had complete access to all relevant data, a black swan occurrence, hack, or tweet from a prominent figure might cause values to drop. This is why it’s critical to prepare ahead and take precautions to limit your losses in a rapid catastrophe. Crypto investors should plan ahead of time their trading tactics, as well as their entry and exit positions if feasible.

Conclusion

When trading bitcoin, you must be able to control your risk and emotions. Good traders are always willing to admit and learn from their errors. Traders who are skilled at what they do flourish due to their own mistakes in the past.