On this page, we will provide you with guidelines to ensure that you are investing responsibly. We will also provide links to further information that can help you learn more about financial responsibility.
Never invest more than you can afford to lose
No coin goes up forever and while it can be tempting to go all-in when markets look good, it is crucial to remember that no market goes up forever and that your capital is always at risk when investing. Invested capital is illiquid and can’t necessarily be accessed quickly on a rainy day.
When shorting, an investor borrows an asset, sells it immediately, and hopes to buy it back at a lower price in the future, keeping the difference as profit. However, if the asset’s price goes up, the investor will have to buy back the asset for more than they initially paid, incurring the difference as a loss. As there is no upper limit to an asset’s price, potential losses from shorting are unlimited. Risk management tools such as stop-loss limits should always be considered when shorting.
Unregulated exchanges and brokers
In the world of online trading, there are a lot of different types of platforms and exchanges that you can choose from. It can be pretty overwhelming, especially if you’re new to the game. But one thing you should always keep in mind is whether or not a particular platform or exchange is regulated by financial authorities.
Unlicensed brokers and exchanges are not regulated by financial authorities, and as such you are not protected by law in your interactions with them. Regulation is often viewed with disdain in the financial sector, but it provides a safety net and legal assurance that is invaluable to novice investors. Avoid unregulated brokers and exchanges wherever possible.
If you want to learn more about investing responsibly, or if you are suffering from issues relating to irresponsible investment, please consult these further resources.
Money Advice Trust — If you require advice on managing your funds
Which? Investment Risk Guide — If you want to learn more about the risks associated with the different forms of investing
Investopedia Shorting Guide — If you want to learn how to manage the risks of shorting while trading different strocks and crypto