No matter how much you’re trading, it’s best practice to make sure you’re doing so responsibly. With simple tips and methods, you can reduce unnecessary risks and make sure you’re only trading what you can afford to lose. For some people, it can be easy to get carried away. If you want to learn how you can better manage your trading, read through our guide to determine your correct limits and improve your overall responsibility.
What is responsible trading？
Trading crypto responsibly is more than just watching how much you’re buying and selling. You should be in control of your trading behavior rather than act based on emotions. You also need to take accountability and understand if the trading activity you’re doing really works for you.
Responsible traders will avoid the behavior and activities that can lead to irresponsible trades. A large part of responsibly trading crypto is to recognize when your decision-making might be negatively influenced. This skill does come with time and experience, and it’s common for new traders to trade impulsively or rely on gut feeling. The more you avoid this, the better.
How does Binance help people trade responsibly?
8 tips to help you trade crypto responsibly
Trading cryptocurrencies responsibly requires you to manage multiple aspects of your trading behavior. It doesn’t start and end with the buy or sell button. Try and incorporate as many of the tips below as possible into your routine. It might seem like a lot of advice, but they will help to improve your trading skills.
Secure your trading account and wallet
Create a trading plan
Your plan should outline the kind of trades you want to make, conditions for trading, and your trading objectives. Your risk profile and trading style will determine what your limits are. You should create your trading plan with a clear mind and be happy to follow at a later date with what you’ve decided. Your trading plan can include:
How much leverage you want to use if any at all
Entry and exit prices for specific trades
Maximum investment amount as a percentage of total capital
How diversified your portfolio is
Your crypto asset allocation
When to stop trading (time, volume, etc.)
The products or assets you trade
Use stop-limit orders
You can easily use stop-limit orders on Binance for greater control over your trading. You can’t always be at a screen 24/7, and with crypto being so volatile, you can be left with unexpected losses. Leaving large amounts of crypto without any protection from volatility isn’t a responsible way to trade. Once you’ve set up a trading plan, you can easily use stop-limit orders to stick to it.
You first set the stop price to $32,000. This is the price that will trigger your limit order. You then set the limit price to $30,000, meaning your 1 BTC will sell for $30,000 or better if the stop price is reached.
By leaving a gap between the stop price and limit price, your stop-limit order has the best chance to fill. Without a gap, the market price could move below your limit price without filling your order.
Do your own research
Diversify your portfolio
While you can research and find good investment opportunities online, you should always watch out for shilling. Users with ulterior financial motives will promote their coins or projects, regardless of their actual value. Shillers will take advantage of FOMO and manipulate traders’ emotions. If you begin to feel that you’re missing out on an opportunity you’ve never heard of before, take some time to research the project thoroughly before risking your money.
There are a lot of things that can cause FOMO. Recognizing them can help you realize its triggers.
- Social media: Twitter, Telegram, Reddit, and other social platforms contain rumors, false information, and shillers. You should always DYOR. Many influencers are paid to promote projects and altcoins, and scammers may take advantage of your FOMO to steal your funds.
- Gains: If you’ve been on a winning streak, it can be tempting to get reckless with the gains you’ve made. You may also be overconfident in your skills and proceed to make bad picks. Even if you’ve made a healthy amount of profit, this can increase your FOMO in other “big” investment opportunities.
- Losses: In an attempt to make back losses, your FOMO can increase. You may even enter a position, exit after making losses, and then reenter the position because of FOMO. Both of these can end up causing even bigger losses.
- Gossip and rumors: Hearing information from other traders or through the internet can make an investment seem tempting. However, rumors, investment advice, or recommendations for a popular cryptocurrency should never take the place of solid research and analysis.
- Volatility: Big price fluctuations in both directions provide opportunities for making profits. Whether you’re investing and hoping the price will go up or shorting the cryptocurrency market in a downturn, it can be easy to get carried away. You might also see a bearish market as a good opportunity to invest but end up catching a falling knife.
You may have seen leverage displayed as a multiplier like 10x, multiplying your initial capital by 10. $10,000 leveraged 10x gives you $100,000 to trade, and your initial capital is used to cover your losses. Once your capital runs out, the exchange liquidates your position.