How to Create and Manage Your Cryptocurrency Portfolio
How traders manage investments in an overall cryptocurrency portfolio.
A cryptocurrency portfolio helps you track and manage your digital assets. It provides you with an overview of all your cryptocurrencies, their amounts, and values, as well as the profit/loss of your overall investment.
Manage your Cryptocurrency Investments and Portfolio
With over $1.7 trillion in valuation, the market now encompasses more than 8,000 digital currencies. In addition to executing a trading plan that mitigates risk, it is important to diversify your cryptocurrency portfolio to lower the negative impact caused by sharp falling in prices of one asset.
In this article, we review how to build a cryptocurrency portfolio that reduces risks and optimizes a strategic investment.
1. Trading Plan
Create a strategic trading plan before putting your investment. A trading plan helps you mitigate losses in the event of sudden risks. Moreover, a trading plan helps keep emotions out of the trading equation - it prevents you from buying greedily when prices decrease. A plan allows you to keep track of things, and it requires that you execute trades based on your strategy.
2. Have a Risk/Reward Ratio
The risk/reward ratio (R/R) refers to calculating the risk a trader is taking when chasing a potential reward. To calculate the risk/reward ratio, you divide the maximum risk by net target profit. You are required to set a stop loss and take profit target for a specific trade. This will help you with derive the potential reward for every $1 that you invest.
3. Diversify Your Investments
A diversified cryptocurrency portfolio mitigates risks and increases the chance of profit. Moreover, it leverages opportunities from multiple coins and blockchain projects other than prominent cryptocurrencies like Bitcoin. The market is volatile, and including a mixture of coins prevents a trader from losing the overall value of investment. There are a number of strategies for diversifying your cryptocurrency portfolio into multiple tokens.
4. Research on Projects
There are around 8,400 blockchain projects in the markets, each working on different applications in numerous industries. These tokens enable a utility function in the cryptocurrency project, and so the success of the token largely depends upon the performance of the blockchain project. Research the fundamental and technical analysis of different coins to understand your crypto investments.
For instance, you may want to research different fundamental aspects of a blockchain project. This includes conducting your due diligence on the product, its team, roadmap, whitepaper, website, token, and more. This allows you to invest in the project considering its potential.
5. Planning Entry and Exit Points
Risk management is an essential part of managing your crypto-portfolio- and that means knowing when to enter and exit. You should always know at which points you want to enter and exit. For each trade, you can plan the entry and exit points by setting limits, including stop loss and take profit.
6. Allocation of Portfolio
There are several strategies that you can apply to allocate a certain percentage of your portfolio based on the functionalities of different cryptocurrencies. For instance, one strategy is to decide your allocation on prominent coins like Bitcoin or Ethereum and decide allocation to other coins which may not be considered completely safe assets, but hold the potential for growth.
You can also consider rebalancing your holdings by choosing which coins you want to allocate month per month basis. With this, your crypto portfolio encompasses multiple coins with a strategic approach.
Do Not Fall into FOMO
Cryptocurrency space is progressing at a rapid scale with multiple projects being introduced every day. These projects cater to applications in different industries. Moreover, these projects use marketing tactics that influence you to invest in it. But it is necessary to remain careful, conduct thorough research, and make strategic investments.
How to Manage your Cryptocurrency Investments with Cryptohopper
Cryptohopper enables crypto investors with various experience levels to execute algorithmic trading strategies using its trading bot. The trading bot enables you to manage aspects of your cryptocurrency portfolio in an easy and automated fashion. Moreover, you can leverage the bot to fit your trading strategy. Cryptohopper helps you to manage your diversified cryptocurrency portfolio from one place.
Users can also access its advanced features including take-profit, stop-loss, trailing stop-loss and the trailing stop-buy while placing their order. Our bot helps you connect across multiple exchanges and invest in more than 100 coins. You can create trading plans or even copy trades or strategies from other traders. To manage your portfolio with Cryptohopper, you can use a simple or advanced view.
Investments in digital assets are no longer restricted to Bitcoin and Ethereum. The market integrates different properties including DeFi coins, privacy coins, utility tokens, security tokens, and more. It also presents opportunities for growth as some projects carry unprecedented potential with strong foundations and team. But it is necessary that you devise a plan before forming a diversified portfolio.