What is Crypto Trading in Kenya

How to mitigate the risks of Crypto Trading in Kenya

👉 While crypto trading can appear riskier than all other financial instruments, Kenyans must remember that all investment carries a certain degree of risk.

👉 While cryptocurrency may be trendy right now, it is important to keep in mind that the industry is still noticeably young and should be seen as extremely speculative. You should expect difficulties whenever you make a new investment.

👉 If Kenyans want to trade crypto, they can take measures to protect themselves and ensure that they make educated investment choices.

👉 Some tips that Kenyans can follow to mitigate the risks involved with crypto trading include:

➡️ Invest “buffer” Money

➡️ Position Sizing

➡️ Make sure You have the right Risk-Reward Ratio

➡️ Research brokers and exchanges

➡️ Make sure you know how to store your crypto safely if you buy physical coins

➡️ Diversify your investments

➡️ Invest in companies that have crypto holdings

➡️ Always be prepared for volatility in the crypto market

➡️ Consider Copy-Trading

➡️ Hedge Your Positions

➡️ Always use Stop-Loss and Take Profit Orders

Invest “Buffer” Money

👉 You cannot put all your eggs in the cryptocurrency basket, as the constant warnings about price swings should have been made clear. Considering this, it is important to have a safety net in place before committing any significant funds to cryptocurrency.

👉 The money for this should not come from what you would need to survive. It is also not recommended to use borrowed funds to purchase cryptocurrency.

👉 Instead, it is recommended that you spread out a modest investment over a lengthy time frame. You may start with a little investment and go up if your financial situation improves.

Position Sizing

👉 One way that cryptocurrency traders mitigate risk is via the use of appropriate position sizes. When the market crashes, traders who have risked a sizeable portion of their cash without a trading strategy might lose a lot of money.

👉 Position sizing allows you to build a trading strategy that considers your risk tolerance, the number of coins you want to invest in, the size of your potential losses, and other variables.

👉 Position size is a tool for determining the maximum amount of money you are willing to lose in a trade.

Make sure You have the right Risk-Reward Ratio

👉 When trading, it is important to weigh the risks involved against the possible gains, a concept known as the risk/reward ratio (RR). Risk-reward ratios facilitate an evaluation of return on investment for a currency unit’s outlay.

👉 The risk-reward ratio may be determined by dividing the total amount of potential loss by the amount of money set aside for profit. For each trade, you must choose where you want to enter and exit the market (the stop loss and take profit levels, respectively).

👉 Consider a scenario in which you want to invest $1 in Bitcoin and hope to get a 10% return. You are attempting to limit your losses by instituting a stop loss of 5%.

👉 The RR ratio in this situation is 5/10, which is 1:2. Therefore, you stand to make $2 for every $1 you risk. If the risk-to-reward ratio is excessive, you should reconsider the transaction.

Research brokers and exchanges

👉 Learn about cryptocurrency exchanges and brokers before making any investments. Some sources put the number of available exchanges at over 500.

👉 Before you make any investments, be sure you have done your homework by reading reviews and consulting with seasoned professionals.

👉 One of the best ways to lower your cryptocurrency investment risk is to study the industry properly. Do not rely on your financial choices on empty promises. Make sure crypto is not the only kind of investment you are making and do your homework on the asset you are considering purchasing.

Make sure you know how to store your crypto safely if you buy physical coins

👉 Those who invest in cryptocurrency are obligated to find a safe place to keep their funds. It may be stored in a digital wallet or on an exchange.

👉 There are several varieties of wallets, each with its own features, technological specifications, and level of security. In the same way that you would learn about your exchange options before putting money into them, you should learn about your storage options before putting money into them.

Diversify your investments

👉 Investment strategies that focus only on one asset class are doomed to failure, and cryptocurrency is no exception. Investing just in Bitcoin, for instance, because that is the term you recognize, would be a mistake.

👉 Spreading your investment over many currencies is a clever idea since there are hundreds of opportunities to choose from.

Invest in companies that have crypto holdings

👉 If you are nervous about investing directly in cryptocurrencies, you may diversify your risk by purchasing shares in firms that already own cryptocurrency. Subsequently, the businesses would protect you from the risks associated with cryptocurrency.

👉 The quantity of cryptocurrency held by the firm is related to the degree of risk involved. To find out what kind of crypto assets a corporation has, all you must do is look at its financial sheet.

Always be prepared for volatility in the crypto market

👉 Keep in mind that there will be both rises and falls in the cryptocurrency market. There will be large fluctuations in cost. You should avoid cryptocurrency if your savings or risk tolerance cannot withstand such volatility.

Consider Copy-Trading

👉 To use this tactic, one just mimics the actions of a successful cryptocurrency trader. Some cryptocurrency exchanges allow users to easily replicate the actions of successful traders.

👉 Choose a crypto trader based on their record of accomplishment, the number of people who follow them, and the level of risk they are willing to take on your behalf.

👉 Once you have found a trader you like based on these criteria, you may connect your account to theirs so that your account automatically buys and sells the same assets they do.

Hedge Your Positions

👉 Hedge your bets if you cannot decide which way the asset is going to go. When you hedge your bets, you make two trades: one in the way you think the market will go and one in the opposing direction. No matter what happens to the asset’s value, hedging will protect your investment.

👉 Futures markets provide a way for crypto investors to protect their portfolios by going long or short. Going long is a strategy where one anticipates an increase in the value of a cryptocurrency and agrees to acquire it at today’s prices at some future date.

👉 When one anticipates a decline in the value of a cryptocurrency, one may choose to “go short” by entering a futures contract to sell the asset at the current market price.

Always use Stop-Loss and Take Profit Orders

👉 Two separate but complementary methods for limiting losses and locking in gains are “Stop Loss” and “Take Profit.” When an asset’s price drops below a predetermined level, the deal is automatically closed using a stop-loss order.

👉 When the price of an asset reaches a predetermined Take Profit threshold, the deal is automatically closed. By adopting these methods, you may reduce the impact of your emotions on your trading. Further, getting out of a transaction before the market goes against you is always recommended.