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.
Before you even start trading, the best thing you can do is secure your account. No matter how responsibly you plan your trades, it’s worthless if your funds, account, and password are compromised. There are multiple ways to do this, including using two-factor authentication
(2FA), creating a strong password, and whitelisting withdrawal addresses. We’ve even collected 15 Tips to Enhance Security for Your Binance Account
to make sure your crypto is SAFU
If you also use an external cryptocurrency wallet
, the same rules apply to your private key
. You should never share your private key or seed phrase
with others, just like your bank account details. Depending on your needs and level of security, you can pick a digital wallet from our list of recommended Binance Smart Chain wallets
. If you have the option available, you can store extra funds on a hardware wallet
to keep them safe.
The best way to not let your emotions interfere with your trading is to create a plan and stick to it. This way, sudden gains, losses, rumors, or FUD
can’t disrupt your decision-making. So what goes into 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
your portfolio is
Your crypto asset allocation
When to stop trading (time, volume, etc.)
The products or assets you trade
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.
For example, imagine you purchased 1 Bitcoin (BTC)
at $15,000 (US dollars), and the price of Bitcoin is now $40,000. You want to make sure that if the price falls, you won’t sell for less than $30,000. This will leave you with a $15,000 profit. To automate this, you can set a sell stop-limit order.
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.
Note that a stop-limit order isn’t always guaranteed to fill, but when they do, you will always get the price you set or better. For more information on how to use stop-limit orders, check out What Is a Stop-Limit Order?
Although we offer educational and research materials through Binance Academy and Binance Research, this should only be the beginning of your analysis. Do your own research (DYOR)
to validate and double-check any information you find.
This advice goes for both trading and investing in coins through the exchange and using Decentralized Finance (DeFi)
products. Only you know best your risk profile and what’s suitable for your portfolio. Before you start investing and trading, make sure you have a good understanding of where you're putting your money.
If you decide to create a trading plan, you should cover portfolio diversification to reduce your risk
. Holding just one or two assets in your portfolio tends to be riskier. As such, you can diversify your holdings by investing in different assets across multiple asset classes.
In crypto, you can begin by defining your asset allocation. You could allocate your investments in DeFi liquidity pools
, derivatives, stablecoins
, and altcoins. By reducing your exposure to one single crypto class, you are less likely to experience big losses. For example, you may experience impermanent loss
from a liquidity pool you’re invested in but offset your losses through staking gains.
You can then diversify within these different asset classes. For stablecoins, you could hold BUSD
, and PAXG to reduce your overall portfolio risk even further. But these are just examples. There are multiple responsible ways to plan out your crypto portfolio
Fear of Missing Out (FOMO)
is a common feeling for many traders. However, you need to be careful how it affects your actions. The fear of missing out on an investment opportunity can cause you to abandon your limits and trading plans with rash judgments. We now have access to an incredible amount of information via the internet, social media, and other communications channels, making us all susceptible.
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.
The idea of borrowing funds on margin or futures to make larger gains can sound attractive. However, with this comes the risk of being liquidated
and losing all your capital quickly, as your losses are enlarged too. Liquidation isn’t necessarily bad if you stay within your limits. However, losing more than you planned or risking too much money isn’t responsible trading. Before you start using leverage, make sure you understand exactly how it works.
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.
Leverage trading can be used irresponsibly. It has a much higher risk, so make sure to carefully study Coin-Margined Futures
and USDT-Margined Futures
to understand the risks fully. Binance also protects new users by limiting their leverage
to encourage responsible trading.
To help traders use leverage responsibility, Binance has an inbuilt feature for Binance Futures to help you control the amount you trade. You can use the Cooling-Off Period
to stick to your trading plan and make sure you only trade within your means. By enabling the feature, you can choose to lock your account for up to a month. Once you’ve turned on the Cooling-Off Period, it cannot be reversed until the timer is finished.