The cryptocurrency market is always attractive due to the potential for high profits, but it also carries significant risks due to high volatility. For newcomers, managing risk not only helps protect capital but also maintains a stable mindset when trading. Here are 8 basic principles you should apply:

1. Only Invest Money You Can Afford to Lose

Cryptocurrency can increase multiple times but can also lose value very quickly. Therefore, only use capital that you are willing to lose without affecting your daily life. This principle helps you avoid financial pressure and make hasty decisions.

2. Clearly Define Entry & Exit Points

Before entering a trade, clearly define:

  • Entry Point: the price at which you want to start trading.

  • Take Profit: the price at which you will sell to secure profits.

  • Stop Loss: the price at which you will sell to limit losses.

Pre-defining these levels helps you avoid getting swept away by emotions when the market fluctuates.

3. Use Stop-Loss Orders

Stop-loss is an automatic selling tool when the price drops to a certain level. This is an effective way to protect your capital, especially when you can't monitor the market 24/7. Don't hesitate to set a stop-loss, as it acts like a 'shield' that helps you survive in the long run.

4. Diversify Your Portfolio

You should not go 'all-in' on a single coin. Allocate your capital across different assets such as BTC, ETH, top altcoins, stablecoins, or promising projects. This helps minimize risks when one asset drops significantly.

5. Maintain a Reasonable Profit/Risk Ratio

A common rule is that the potential profit ratio should be 2–3 times the risk. For example: if you are willing to lose 100 USD, then the profit target should be between 200–300 USD. This approach helps you maintain stable profits even if some trades incur losses.

6. Avoid Excessive Leverage

Trading on margin or futures with high leverage can multiply profits many times over, but it can also quickly lead to account 'burnout.' New traders should start with spot trading to get familiar before trying leverage at lower levels.

7. Always Update Information

Market news, policy changes, or project information can significantly impact coin prices. Regularly update information from reputable sources and be cautious of unverified rumors.

8. Have a Clear Trading Plan

Before participating, determine your goals (short-term or long-term), trading style (day trading, swing trading, or long-term holding), and the amount of capital you are willing to invest. Once you have a plan, be consistent and avoid letting emotions take over.

💬 Conclusion

In crypto, risk management is more important than seeking profit. You may miss a good opportunity, but don't let your capital be lost due to a lack of discipline. Think of risk management as a 'armor' protecting you on your investment journey.