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Investing in cryptocurrency might just be one of the most exciting journeys in your life. To help you in this endeavor, you would need to build and manage a crypto portfolio. This is usually done on trading tools where you can decide where to invest and also assess your risk tolerance.
Why Use Trading Tools to Manage Your Crypto Portfolio?
The simple answer is so that you could manage your risk and capitalize on market movements on one interface. Different platforms have different tools for you to take advantage of, but here are the most common examples of crypto trading tools.
Leverage 24/7 Trading
Unlike traditional markets, crypto markets never sleep. Because of this, crypto traders can capitalize on volatility and intraday swings without limit. However, it might be good to have advanced trading tools to manage risks and maximize gains. With advanced tools, you can set rules and program a trade according to your risk level. This will let you capture trading opportunities anytime, even while you sleep. It’s important to have some automation tools in your trading because if the market changes direction all of a sudden when you’re not aware, you could avoid losses on a large position quickly.
Buy & Sell Crypto Faster
With crypto trading, time is of the essence. You wouldn’t want to miss the chance on a potentially large profit. Advanced trading tools can help you respond quickly to the volatile crypto market and produce successful trade outcomes. This is especially useful if you’re a pro trader with a large fund allocation who needs to manage your crypto portfolio and trading strategies more efficiently.
Make Use of Arbitrage Opportunities
If you’re looking into the simultaneous buying and selling of crypto assets in different markets, crypto trading tools can help you do that. In other words, you can take advantage of differing prices for the same asset across different exchanges. A crypto trading tool does this by aggregating data from all relevant spot and derivative venues.
Enjoy Multiple Asset Class Trading
It’s just easier to trade multiple asset classes within one platform. You can save time while executing more efficient trades across the various classes. With one consolidated view of your crypto portfolio, you can visualize and manage everything from one interface.
Simplified Risk Management Process
As the above has made clear, using crypto trading tools to manage your portfolio simplifies your trading experience. You don’t have to worry so much about losses on a large position when you’ve programmed a trade based on your risk tolerance. If you’re an institutional trader, this is especially useful as you can manage different risk tolerance levels for different clients’ crypto portfolios.
Brief Technical Concepts on Crypto Trading
Now that you are aware of some common trading tools, here are a few examples of how traders put those tools into practice.
Automatic Rebalancing
Portfolio rebalancing is a time-tested strategy that has been used in stocks and bonds for many years. It’s essentially making sure the assets in your portfolio maintain a desired level of allocation and/or risk. With an automated crypto trading tool, you will be able to buy low and sell high on auto-pilot. It takes advantage of the sometimes cyclical nature of the market and trades coins from those that performed well over the period to those that didn’t do so well.
Dollar-cost Averaging
With an automated crypto trading tool, you can distribute the funds you’ve deposited into desired allocations. This means you wouldn’t need to manually execute trades to implement a dollar-cost averaging strategy. You just choose your desired portfolio allocations that you’d like to maintain, deposit the funds on a regular basis, sit back, relax, and let the trading tool take care of the rest.
Smart Order Routing
This is essentially an automated process of handling trade orders. You would just have to key in what asset to buy and sell. The trading tool will calculate to find the best prices across different trading pairs and execute the trade on time. As a result, you no longer need to manually check and capture the best trading opportunities every hour. With a crypto trading tool, you’ll get the most out of every order.
No Need to Get Emotional
Indeed, with an efficient trading tool, you wouldn’t even need to monitor your emotions. Once you decide on your portfolio allocations and determine your risk tolerance level, the automated trading tool will manage your crypto portfolio with ease and high efficiency.
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CoinGecko
CoinGecko's editorial team comprises writers, editors, research analysts and cryptocurrency industry experts. We produce and update our articles regularly to provide the most complete, accurate and helpful information on all things cryptocurrencies. Follow the author on Twitter @coingecko
