Portfolio diversification is not a term that’s commonly used across the crypto community, as these investors tend to focus solely on digital assets, often to their own peril. More advanced traders or those who have experience around traditional markets, however, rely on portfolio diversification as a means to reduce risk and increase opportunity.
Making matters more challenging, very few platforms offer the ability to diversify so well across various markets as PrimeXBT. In most cases, platforms will lean heavily on cryptocurrencies like Bitcoin and altcoins. But, being from the same asset class leaves them exposed to the same risk factors. By layering in other markets, such as gold trading, a trader can create greater exposure to profits and reduce risk associated with losing positions.
With PrimeXBT, portfolio diversification is as simple or advanced as you would like it to be. Read on to learn all about how to take advantage of PrimeXBT’s massive list of more than 50 different CFDs that can be used to build the most diverse trading portfolio around.
Why Diversify A Trading Portfolio? For The Little Guy
If you are reading an article about portfolio diversification, congratulations on making a wise decision on what to do with your capital. Portfolio diversification isn’t something that typically kicks in for traders or investors until their capital grows to a respectable level.
Small amounts of capital could potentially be used towards aggressive growth, but as capital becomes more abundant, becoming more calculated in where capital goes is necessary to the most success.
For example, a young trader gets into Bitcoin and puts $2,000 worth of capital in the market. This is their entire life savings, so of course they care deeply about it, and want to get the most out of their money, so they aggressively put it all into the top cryptocurrency by market cap and HODL. But the market turns, crashes, and crypto gets wrecked. This poor trader only got poorer, and the losses could potentially have been reduced if half the capital was put in another market.
Why Diversify A Trading Portfolio? For The Capital Manager
Now in the case of a large capital manager, preventing risk becomes more crucial to capital growth than being aggressive. Caution and care become more critical to success. Now imagine a million worth of capital on the line, some of which is client’s money. A smart capital manager wouldn’t bet it all on Bitcoin, because there’s a chance of another 50-80% crash, which would turn that million into a few hundred thousand.
Capital managers have responsibility to their clients, and can’t risk their money or even their own on such positions. Instead, they’ll allocate a portion of capital toward risk-on assets like crypto, then rebalance from there across stock indices, metals, commodities, forex, and more.
Going back to the example with Bitcoin and altcoins. If Bitcoin crashes, the entire crypto market follows. To avoid such a scenario from decimating one’s capital, focusing on less volatile assets like metals and forex can help to keep major movements in one market from hurting the other. Assets can be correlated, uncorrelated, or even anti-correlated. Some combination of these attributes can create one powerful portfolio.
PrimeXBT And The Power of Portfolio Diversity
That’s where PrimeXBT comes in. The award-winning multi asset margin trading platform offers no minimum deposits on accounts in BTC, ETH, USDT, and USDC. Using such accounts, traders can go long or short on more than 50 different CFDs, ranging across digital and traditional assets.
In terms of cryptocurrencies, traders will have access to Bitcoin, Ethereum, EOS, and Litecoin, with trading pairs against the dollar or BTC. All major forex currencies are included, along with plenty of minors and a slew of exotics. The world’s most popular stock indices are also represented, with the S&P 500, DAX 30, Dow Jones, and more. Gold, silver, oil, and natural gas are also in tow for the largest one stop shop offering in the market.
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Long, Short, And Hedge Positions For The Most Possible Control
Not only can traders build a diverse portfolio across a variety of assets and markets, but long and short positions let traders build hedge positions and more for the greatest possible diversity. For example, when Bitcoin rallies, one might also want to short gold as capital from the gold market has been a large source of the cryptocurrency market momentum.
The stock market and crypto can often trade in correlation to one another, but that correlation has recently broken. If it returns, the two asset classes together might not be so great to pair together as they will react to the same market conditions.
The real value is in the variety itself. With all this flexibility offered to traders around every corner, PrimeXBT has become the de-facto platform for traders seeking diversity in their portfolios. When crypto moves sideways, traders can find action elsewhere in traditional markets. And when crypto gets moving once again, an individual’s portfolio can be less impacted with the right balance of long and short positions across the lineup of PrimeXBT’s trading instruments.
Putting The Portfolio Diversification Puzzle Together With PrimeXBT
The last piece of the puzzle is then how to manage such a large portfolio. Typically, it would require several brokers to accommodate such a portfolio, but with PrimeXBT they’re all under one roof. This makes managing things easier, but it gets even better due to the free mobile app. With the free smartphone app for Android and iOS devices, users can maintain and manage positions from anywhere in the world.
This means one’s portfolio is just a tap or two away, no matter where you are or what you’re doing. Built-in charting tools also keep those portfolios growing in the right direction, by strategizing ahead of time and picking the right winners to build and diversify with. Portfolio diversification is an incredible way to improve the chances of success while reducing risk. Find the most opportunity with an advanced award-winning trading platform like PrimeXBT.
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