5 smart ways to minimise risk when investing and trading crypto

Crypto risk management 

Cryptocurrency investing is becoming ever more popular with retail investors and institutions alike, especially as part of a balanced portfolio of assets. But while this asset class can offer substantial upside, it’s also true that crypto remains one of the most volatile and unpredictable financial markets in the world.

Any seasoned crypto investor will be used to wild price swings, because cryptocurrency as an asset class is much more speculative than others, and a coin’s value may rise or fall rapidly with no warning at all. The market is also far less regulated than stocks, which makes crypto ripe for scam artists.

For investors and traders looking to profit from crypto while reducing the associated hazards to the minimum possible, risk management is not optional. Below, we have listed five smart, practical ways to cut your risk when investing or trading crypto, whether you’re holding for the longer term or executing scalp trades.

Importantly, crypto can only be rewarding if you treat it with the seriousness it deserves. There are no guaranteed returns, but there are several commonly used strategies to help manage the potential downside — and these tend to separate the speculators from the successful investors.

How to invest or trade in crypto with us

As we consider the basics of crypto risk management, consider how to get started with us:

1. Open an account online or download our IG Invest app. From there, you’ll be able to access the cryptocurrency market through our platform.
2. Learn more about how the cryptocurrency market works and choose a coin to research.
3. Build a trading plan that aligns with your personality and risk appetite.
4. Search for your desired coin on our web platform or app.
5. Choose your position size, then open and monitor your investment.

Remember that past performance is not an indicator of future returns, that the value of investments can fall as well as rise and that you could get back less than your original investment.

If you want to test out your strategy first without risking real capital, consider our demo account where you can practice your cryptocurrency trading tactics with virtual funds.

Portfolio diversification 

Diversification is arguably the most important strategy for managing risk, no matter the type of investment. Most retail investors spread their capital among different asset classes, including cash, bonds, stocks, property and crypto. Commonly, cryptocurrency does not constitute the majority of a portfolio.

And just like investing in stocks, most investors choose to diversify their crypto holdings by constructing a portfolio that spreads risk across different categories, use cases and volatility levels.

For example, you might want to consider holding larger amounts of established coins like Bitcoin or Ethereum, middling amounts of mid-cap coins with solid fundamentals like Solana or Cardano, and then a smaller percentage of high-risk, high-reward start-up altcoins. New projects can skyrocket due to the inherent volatility of the digital asset market, but for every coin that generates massive short-term returns, dozens more fail.

You might also consider diversifying by blockchain — for example, holding only tokens from Ethereum-based projects ties you to the fate of a single ecosystem — so including projects from other chains like Solana, Avalanche or Polkadot can help protect you in case of an ecosystem failure.

You can also diversify by utility type. Bitcoin is payments-focused, while Ethereum is designed to power smart contracts, and others work as governance tokens or stablecoins. Mixing these helps reduce exposure to one narrative or trend, which can be particularly important in a crypto bear market.

Risk management tools 

We offer plenty of tools designed to help manage your risk when trading any asset. The two most important are perhaps stop-losses and take-profit orders, which help to limit downsides and lock in potential profits; but as with all trading tools, they must be used with care.

For example, you might apply a percentage-based stop, where you set the stop-loss at somewhere around 5-10% below your entry. If the coin falls to this level, the stop-loss will automatically sell you out, preventing further losses. Some prefer volatility-based stops when trading crypto, using indicators like Average True Range to set stops based on the coin’s typical price swings.

There’s also trailing stops, which adjust as the price rises, securing gains while still allowing for upside — and take-profit scaling, where instead of selling everything at one target, you take partial profits at multiple percentage increase levels.

However, it’s worth noting that crypto volatility means that these tools can contribute to overall losses — for example where a coin moves by more in a day than you set the tools for. As a general rule, it’s harder to set and forget than with stocks.

Disciplined trading  

Crypto investors and traders often get emotionally attached to their investments, and emotion can be a real danger for portfolios. Fear of missing out (FOMO) or going ‘on tilt’ (a poker term, where a player has lost emotional control and begins playing recklessly, usually leading to more losses) are common.

If you’re not prepared, it’s easy to fall into these emotional traps, breaking rules, chasing unsustainable gains, or selling during temporary dips.

Many crypto investors write down their plan, defining their entry and exit, risk per trade, position size and goals. Others use spreadsheets to track their decisions, identifying past emotional mistakes to prevent themselves from making more.

You might want to limit your exposure during times of severe volatility, especially if you find sharp portfolio movements emotionally exhilarating one moment and then sobering the next. Some traders prefer to set alerts for price levels and only check in when needed. And it’s commonplace to see newer traders overtrade, especially during major news cycles or token launches — when sometimes, the most profitable thing to do is sit tight and hold.

For perspective, it's worth noting that crypto is even more volatile than forex. As an example, between 2024 and 2025, the value of the pound never fluctuated by more than 10% in a single day. By contrast, Bitcoin experienced much greater volatility during the same period, with its value rising by 22% on one day and dropping by 26% on another.

Research advantage

In crypto, hype travels fast — but so does misinformation. A common refrain in the space is to DYOR (do your own research), but this doesn’t mean following influencers into a project or reading biased threads on social media. It means taking a carefully considered approach to investing in a project, understanding what it does and how it works.

This involves, at a minimum, information about the team including its founders and whether they have delivered a successful project before. You might also want to consider whether the project is attempting to solve a real issue or exists for the sake of itself.

Then there’s quantitative considerations, including the supply cap, major token holders, lock-in periods, and whether the market contract has been fulfilled. You might also want to check that the firm auditing the coin is reputable — and perhaps whether fellow investors talking about the asset are engaged in meaningful dialogue or are simply pumping it for quick profits.

Regardless of the asset, where the largest gains are promised tends to be where the most risk is found. If a project is promising massive returns but without clear audit, solid management and an obvious use case, there’s a good chance it might be a scam.

Conscientious investing 

As crypto is an extremely volatile asset class, it’s key to only invest what you can afford to lose, and more importantly, to stick to this conviction whether the market is being kind or not.

Many crypto investors segment their funds into separate pots; one for long-term investing and a second for short-term trades. It’s also common to limit your exposure to leverage — while it can increase profits, leverage also amplifies risk — which can be tricky to deal with given the already increased risk factor associated with crypto investing.

Position sizing is also popular, where investors risk no more than a few per cent of their total crypto portfolio on any one trade. This means that even a few bad trades in a row won’t hurt too much. But perhaps most importantly, investors might consider having a pre-planned exit strategy. Know ahead of time when you’ll take profits and when you'll walk away. Otherwise, greed or fear will decide for you.

Crypto risk management summed up 

• Diversify your holdings across sectors, market caps and blockchain ecosystems to reduce overexposure
• Automate discipline with stop-loss and take-profit tools, but while staying flexible to market dynamics
• Stick to your plan and avoid trading based on emotion, hype or panic
• Research not just what a project says it does, but whether it delivers value and sustainability