When investing in digital channels, the risk factors differ significantly from those in traditional markets. Digital investment risk management is of far greater importance. Especially when you can invest practically from your seat, you can often be careless in many areas. Many investors are unaware of the size of their account in the digital environment and cannot manage their funds properly.
With digital investing, investors typically get used to investing in a short period of time as if they were playing a game. When investing in the old system, you first followed the market and then invested based on the situation. For example, dollar prices were followed and investments were made in dollars according to the announced interest rate or inflation.
Today, with the wide range of forex, cryptocurrency or technology investments to choose from, it can be easy to lose control of the investment. For this reason, the investor must protect himself by taking control of the risk and remaining in the market.
How to manage digital investment risk?
When investing in cryptocurrency, technology or Forex, there is not always a chance of winning and negative consequences can occur. Because an unexpected price increases, an incorrect transaction or unimaginable disruptive situations can occur.
Of course, investing in digital channels is also trading and, as with all trading, there must be risk. In other words, you definitely take a risk when investing digitally. For example, if you invest in cryptocurrency projects, there will always be a crash after a single message on social media.
In futures markets like Forex, investors can get very lucky, especially if they use leverage. However, this advantage also comes with a great risk. By regularly adopting risk management practices in such markets, you can always channel your capital into valuable investments while protecting your trading balance.
Risk management in digital investments refers to the correct handling of risks when buying and selling. This way, you are protected from negativity and losses, but at the same time you get the chance for a longer-term investment. Additionally, it is possible to achieve good results with the right strategies as long as you protect yourself and your investments. For all these reasons, I can explain to you with detailed subheadings how you should apply proper risk management to minimize the risk of your digital investments.
You should invest as much as you expect to lose
The investor often starts investing quickly without considering how much he could lose. Because usually the investor is very confident and believes that he can easily take control and collect everything. However, the investor often suffers large losses if he or she holds on to this belief. If this rule is not followed, the capital can melt away in a very short time.
When the digital investor invests in the cryptocurrency market or the foreign exchange market, risking as much as he can lose, his decisions are safer. In addition, the error rate is reduced and there is no emotional stress or pressure when investing. In markets like cryptocurrency, changes are instantaneous and large investments can disappear in an instant. Furthermore, although losses are already a problem, it can also become a big problem for you, especially if you lose the money you need.
You should be very careful when using leverage
The leverage offered in markets like Forex actually allows you to invest using capital loaned to you rather than your own capital. In this way, if used correctly, it offers the chance to win almost ten times your winnings. However, if used incorrectly, it can result in you losing much more than you invested.
In order to take advantage of advantages such as leverage in the markets, you must first learn to use it very well and predict the consequences. Investors often use this advantage, especially on futures markets. However, if a small mistake is made when investing through leverage; it can bankrupt you with big losses.
You should use market orders correctly
In digital investment markets, there are important orders such as stop loss and take profit, which are called stop loss. While these orders are used in two directions in the Forex market, today these transactions are also carried out in the cryptocurrency market. If a transaction occurs in your investments that do not correspond to your forecasts, your losses will be stopped at a very low level by the orders you place. On the other hand, your earnings will continue until you reach the desired point.
Good investors do not resort to this type of order because they are very good at assessing market trends. However, an investor who is new to digital investments can be easily distracted because they are unaware of surprises. If orders like stop losses are not used, a bad trade can end in a big loss. Stop losses ensure that your transactions are completed on time and your profit is reached at the highest point. Additionally, it prevents you from trading with the wrong investment psychology.
You should be a realist in the investment market
Your expectations should always be realistic in digital investment markets. Risk management in markets like Forex and cryptocurrency is based on facts. If you do not risk your capital too much, you will not be able to achieve very high profits. However, it is important to achieve good profits in the medium term, not very high profits in a short period of time.
Digital markets allow investors to make controlled investments with realistic goals, without falling into false hopes and greed. When learning the rules of risk management, you need to get used to this psychology and stay in control. Risk management is very important for successful trading, including in physical trading and daily life. Especially if new investors and investors in difficult situations pay attention to these practices, they can make a return from the most important point of loss.
You should do good investment planning
With the previous information, the digital investor can now create the investment plan that is right for them. In other words, one should invest in the right vehicle by setting the right budget with a logical plan without succumbing to instincts and emotions. Knowing and managing risks in advance can help you achieve correct investment results.
If your investment planning is right and you are well organized, you can easily achieve the desired profit rate in the desired period. If you encounter any undesirable situations on this journey, you can reject your investments immediately. This allows you to continue your investments with a new plan as if you had never made a loss before your investments suddenly melt away.
You should add dimension to the positions you take
When you take a position in the markets, adding a dimension to that position allows you to measure the risk you are taking on that trade. For example, when you enter into a single cryptocurrency project, you invest all of your capital without risk. A good investor prefers to invest a certain percentage in a project and closely monitor the project’s progress. While a novice trader channels almost everything through a single trading account.
Experts say that digital investors who practice risk management take risks with a maximum of 1% of their capital for a single trade transaction. You have control over your capital. With wise and trustworthy investments, risks of up to 5% and 10% can be taken in the following periods. Sometimes the market may experience unexpected fluctuations. Taking controlled risks allows you to adjust your investments in such situations without panicking.
You need to be able to calculate your risk-reward ratio
When an investor takes a certain amount of risk in a trade, he also needs to calculate how much profit he can make from that trade. For example, if you invest 10,000 TL in a cryptocurrency and see that you have the opportunity to earn 50,000 TL in a month, you should start investing and plan for it. Of course, you also need to consider the possibility of how much loss you may incur as a result of this investment.
When calculating the risk-reward ratio, the investor usually calculates how many units of profit or loss can arise from one unit invested. So if there is a transaction that is to be invested 1:1, there is no need to carry out this transaction as there will be no profit. Although there is no possibility of making a profit, the transaction may result in an unexpectedly large loss.
Digital investor must rely on a risk management plan
With all the points that I have explained, the digital investor invests by targeting his profit towards a specific goal and taking as many risks as he can bear. Because this information forms the investor’s own risk management plan. Just as individuals trust their own ideas, they must also have absolute confidence in a risk management plan they create. In this way, continuity can be guaranteed by minimizing risks in the investment world without ever incurring large losses.
See you in the next post,