Letslearn
@letslearn
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STRATEGY #5: DO YOUR OWN RESEARCH (DYOR)
😎DYOR is an integral risk-reduction strategy for any investor. In the Internet age, it's easier than ever to conduct your own research. Before investing in a token, coin, project, or other asset, you must do your due diligence. It's key that you check essential information about a project, such as its white paper, tokenomics, partnerships, roadmap, community, and other fundamentals.
😎However, misinformation spreads quickly, and anyone can submit their opinions online as facts. When conducting research, consider where you're getting your information and the context in which it's presented. Shilling is commonplace, and projects or investors can spread false, biased, or promotional news as if it were sincere and factual.
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STRATEGY #3: DIVERSIFY AND HEDGE
😊Diversifying your portfolio is one of the most popular and fundamental tools to reduce your overall investment risk. A diversified portfolio won't be too heavily invested in any asset or asset class, minimizing the risk of heavy losses from one particular asset or asset class. For instance, you may hold a variety of different coins and tokens, as well as provide liquidity and loans.
😊Hedging is a slightly more advanced strategy to protect gains or minimize losses by purchasing another asset. Usually, these assets are inversely correlated. Diversification can be a type of hedge, but perhaps the most well-known example is futures.
😊A futures contract lets you lock in a price for an asset at a future date. Imagine, for instance, you believe bitcoin's price will tumble, so you decide to hedge against this risk and open a futures contract to sell BTC for $20,000 in three months. If bitcoin’s price does indeed fall to $15,000 three months later, you will profit fro… 0 reply
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What is risk management?
🟢We are constantly managing risks throughout our lives – either during simple tasks (such as driving a car) or when making new insurance or medical plans. In essence, risk management is all about assessing and reacting to risks.
🟢Most of us manage them unconsciously during everyday activities. But, when it comes to financial markets and business administration, assessing risks is a crucial and very conscious practice.
🟢In economics, we may describe risk management as the framework that defines how a company or investor handles financial risks, which are inherent to all kinds of businesses.
🟢For traders and investors, the framework may include the management of multiple asset classes, such as cryptocurrencies, Forex, commodities, shares, indices, and real estate.
🟢There are many types of financial risks, which can be classified in various ways. This article gives an overview of the risk management process. It also presents some strategies that can help traders… 0 reply
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