Although trading is not easy, it’s not usually a run of bad trades that leads to a trader having a losing portfolio on a yearly basis. Making the right picks in the market is a key aspect to turning a profit over the long term, but proper money management is also a big part of the game. If you’re not able to manage your cash correctly, you could end up with one mistake costing you an entire year of progress. By managing your funds properly, you can ensure that your smart trades bring you some profits.

Diversify your holdings

The first thing you should realize when it comes to proper bitcoin money management is that you don’t want to put all eggs in one basket. Even if you’re 90% sure that bitcoin is the currency that will eventually take over the world, you still need to prepare for that 10% possibility that you’re wrong. This is where diversification comes into play.

Most professional money managers would agree that bitcoin is still an extremely high-risk bet at this point in time. No one can say they know where the price of bitcoin is going to end up in the future, so it makes sense to limit your exposure to this new digital commodity. Although you may feel like you want to go all-in today, you should try to limit your bitcoin holdings to between one and five percent of your entire portfolio. Even having five percent of your entire savings in bitcoin seems insane to most, which is why you should view it as your maximum bet.

As a side note, you should include any other cryptocurrencies in this one to five percent portion of your portfolio. If you’re also trading altcoins, then you should realize that a failure of bitcoin will probably mean that other altcoins will fail as well. Although there are some unique circumstances out there, the fact of the matter is that most of the altcoins are based on the same code and philosophy as bitcoin. Read more on “5 Advice for Those Who Would Like to Start Bitcoin Trading”.

Always have cash on hand

An important aspect of any trading strategy has to do with greed. If you’re unable to control yourself while trading, then you should not be in the market at all.

When it comes to bitcoin trading, you should try to make sure that you always have some fiat currency on hand. This will allow you to take advantage of buying opportunities as they present themselves over the course of a year. After all, you won’t be able to take advantage of a dip in the bitcoin price if all of your money is already in bitcoin.

Don’t let poor money management skills get in the way of your profitable trades.