7 ways advanced traders can manage risk in a volatile asset class
Managing risk is essential for any serious crypto investor. Advanced investing strategies and risk management tools need to be in play.
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From the first pizza bought with Bitcoins to the boom-and-bust memecoins of today, crypto has always been an exciting, volatile asset class.
For advanced crypto traders, managing risk and being able to find ways to generate profit irrespective of the wider market is critical.
Below, we've compiled some of the key strategies available to advanced crypto traders.
1. DCA investing
Dollar Cost Averaging (DCA) is a popular investment strategy that encourages making regular investments over an extended period of time.
This means that you put a set amount of funds into an asset, irrespective of the pricing at the time or wider market conditions.
It's intended to reduce exposure to risk and to avoid more volatile investments.
For crypto, you this might mean regularly purchasing more Bitcoin or ETH, rather than sporadically purchasing a range of memecoins.
With Kraken, you're able to automate this process via app features.
You can set what you want to buy, how much and how often.
An approach like this can help you keep a long-term focus on investment goals, create discipline and remove guesswork from the investing process.
2. Derivatives trading1
The fluctuating prices in the crypto market are part of the reason crypto can be a risky investment.
However, this has also meant that it presents an interesting landscape for derivatives trading.
Crypto derivatives function like derivatives in other markets. Investors create contracts that take a position on the future pricing of an asset (in this case, a cryptocurrency) to be actioned at a later, agreed-upon date.
Because you're taking a position on pricing rather than holding the asset, this can be a way to earn on crypto even when the market is in a wider downturn.
You can also read more about crypto derivatives on the Kraken website.
However, it is important to note that derivatives trading is considered high risk and is intended for sophisticated investors.
Derivatives are a heavily regulated product and are only available for wholesale clients in Australia.
They are strictly intended for advanced traders and you can lose more than you initially invested.
You can learn more about eligibility criteria on Kraken's website.
3. Limit orders
A limit order allows you to buy or sell your crypto at a fixed price that you nominate.
You may also be eligible for a better price, depending on movements within the market.
This can help reduce risk in trading.
You can be assured that you won't be matched with an offer that's worse than what you've specified.
Similarly, you can use limit orders to indicate when you'd like to sell a specific asset, after it's increased in price.
Just about every experienced trader has a story about hanging onto an asset just that bit too long and missing out on the peak. But we'll talk more about that shortly.
The primary downside is that there's no guarantee that orders will necessarily be fulfilled. They are still contingent on market demand.
Limit orders can be executed through Kraken's app.
4. Staking
Staking can allow you to earn rewards on your existing crypto.
Essentially, you "lend" your crypto to the blockchain and it's used to help verify other transactions occurring on the same network.
In turn, you're rewarded with additional cryptocurrency. This crypto can then be used for a range of purposes, including reinvesting, covering transaction fees, or even converting to fiat currency.
Staking via Kraken enables you to stake without requiring significant technical expertise.
Additionally, you can unstake without penalty, which can be a significant benefit if you need to access your crypto quickly.
You can read more about staking with Kraken right here on Finder, too.
5. Buying during the dip
When prices do fall, it can also be an opportunity to buy.
Perhaps there are specific currencies you've wanted to explore previously, but the asking price has been too high.
Or perhaps you're simply thinking that the market will bounce back, as it has previously. Then, of course, there's potential for profit.
Buying during the dip can sometimes yield impressive results.
With crypto arguably being an inherently volatile market, just about every long-term investor has seen seemingly overlooked cryptocurrencies make impressive returns.
However, caution is always advised.
There are ways to spot obvious scams, but it's also important to remember that the vast majority of cryptocurrencies simply live and "die" in a relatively short period of time.
A dip in pricing may be temporary but it may also be a sign that a coin is heading towards (or is already past) its expiry date.
So NEVER invest more than you can afford to lose.
6. Selling high
"HODL" has become something of a mantra in the crypto world. Hang in there and don't sell simply because the price has hit new lows or new highs, right?
Well, as with many things in investing, it's not that simple.
Bitcoin has hit multiple ATHs during 2025 and has seen ongoing (if sometimes erratic) growth since its debut.
But these are exceptions, and not the rules.
As investors, decisions are meant to be divorced from emotion. This is often easier said than done, particularly when it comes to crypto.
As an individual with a share portfolio, you may not have very strong feelings about, say, steel manufacturing or coal mining.
But the "pure" investor in crypto is relatively rare at this point. People are often attracted to it for a range of reasons: ideological, technological, economic and more.
Accordingly, it's easy for investors to feel proud of "their" cryptocurrency as they've seen it grow over time.
This can lead to situations where people miss the best time to sell, see things through to a bust and ultimately lose out on better opportunities.
So always consider your wider investment plan - and whether it might, in fact, be the right time to sell.
7. Be patient
Last - but certainly not least - patience is essential for the advanced trader.
Every type of investment goes through peaks and valleys. Crypto is no exception, and it can be tempting to make rash decisions.
But as an advanced investor, it's important to stay informed and keep your long-term investing goals in mind.
Kraken's Learn Centre can provide you with a range of educational resources and tools.
With the right information, you're better equipped to stay current and make more informed investment decisions.
Learn more about investing with Kraken today
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How we picked these1. This article has been prepared for information and educational purposes only. It sets out general factual information about derivatives and trading practices. It does not contain, and should not be construed as containing, any recommendation, opinion, or advice (whether general or personal) about a financial product.
Beaufort Fiduciaries Pty Ltd holds an Australian Financial Services Licence authorising it to provide financial services to wholesale clients only. It is not authorised to provide financial product advice or services to retail clients. If you are a retail client, the material about derivatives is not intended for you and must not be relied upon to make any financial decisions.
Derivatives are complex and carry significant risk of loss. The information provided does not take into account your investment objectives, financial situation, or particular needs. Before making any investment or trading decision, you should consider whether derivatives are appropriate for you and seek independent professional advice.
Neither this article nor any of the examples within it should be taken as an offer, solicitation, or invitation to acquire, dispose of, or otherwise deal in any financial product. To the extent permitted by law, Beaufort Fiduciaries Pty Ltd and Bit Trade Pty Limited accept no responsibility for any loss arising from reliance on this material.
Image: Supplied: Kraken