Crypto is known for having very volatile price swings. To handle the ups and downs, many seasoned crypto traders tend to diversify their portfolios, meaning you don’t put all your money into one cryptocurrency.

Spreading investments across a few different assets, and helps to create more balance when one token takes a hit.

Here are some crypto risk management tips:

• Start small and diversify your assets.

• Avoid investing money you can't afford to lose.

• Stick to a clear strategy and avoid impulse trades.

Another smart move is setting stop-loss orders. These are simple instructions to automatically sell an asset if it dips to a certain price.

Here’s a quick breakdown of how stop losses work:

• A stop-loss sells an asset automatically if it drops to a set price.

• You set the “stop price,” triggering a sale if reached.

• It protects against big losses and keeps emotions in check during market dips.

If you're unsure of how to use stop losses with your chosen exchange, look on their page for their guides and search the words "stop loss". If you still feel confused, reach out to their tech support team, or a financial advisor who has a lot of experience with crypto.

Keep an eye on the news, too.

Here are some good sources for crypto news:

• Crypto Panic

• CoinTelegraph

• CoinDesk

Cryptocurrencies can react sharply to market news, so staying informed can help you make choices you can really feel good about.

Avoiding Common Pitfalls

One common misstep you'll want to avoid is chasing hype.

Just because a coin is trending doesn’t mean it’s a wise choice. Usually when a cryptocurrency "pumps" or doubles in value, the early investors will sell their holdings to either recoup their initial investment or to make a profit. This causes the prices to go down.

It’s tempting to jump in on something that's on the rise, but the better approach is to research and understand an asset first. Then wait for a pullback or dip before getting involved.

Another trap to watch out for isovertrading. Making too many trades in a short time can eat into your balance through transaction fees and lead to impulse decisions. Yes, it costs fees to trade crypto. Take your time, and remember that good trades don’t need to be rushed.

Security is another big one. Hackers and phishing scams target new traders all the time, so always stay cautious. Use reputable wallets, double-check URLs, and never share sensitive information, even if a message looks official.

Final Thoughts

There are a lot of details we couldn't cover in this article. Take the time to thoroughly research everything you can before spot trading.

Have a risk management plan, stick to using small amounts, and always use reputable sources.

Exchanges such as Coinbase provide a DeFi wallet you can use on your phone to get a sense of how crypto wallets work within a user-friendly app.

The reason why getting involved in crypto matters is that it can be part of a diversified portfolio, accompanying it with buying precious metals, mutual funds and index funds, and other forms of compounding wealth growth assets.

The steps to growing your crypto portfolio are:

• Taking an interest.

• Learning crypto knowledge.

• Implementing what you learned.

• Managing your investments.

You've fulfilled the first step of taking an interest, now go forth and conquer the other steps.

If you’re ready to dive into more strategies, our eBook on Low-Risk Crypto Investingcan be a great read.

(Disclaimer: This article is not financial advice and is intended for educational purposes only. Our articles are not sponsored or affiliated with any of the businesses, tokens, teams, or protocols mentioned. It is important to conduct thorough research and only invest an amount that you are comfortable potentially losing. For personalized financial advice, consult a professional.)