We will be giving you an overview of what it entails to manage risk when trading altcoins or BTC (Bitcoin). Every pro trader uses the word risk management when talking about Bitcoin trading strategies. Also, it is among the most important terms when it comes to the trading field.
Here is what risk management in crypto entails:
Always use smaller percentages for your capital for single trades
Risk management entails the wise attitude never to go all in. However, it would help if you did the opposite. Ensure that you trade with low percentages of what you have. Every trade always comes with the risk of losing money. Hence, a single loss should never be that destructive when considering your total assets. Try imagining going all in and losing half of your Bitcoins in a clumsy single trade. It would help if you never allowed yourself to be in such a situation.
As a wise trader, you need to take a small percentage of your capital for a single trade and split it into some parts for different take profit levels and entries.
Ensure you have an estimation for the duration of a single trade
Before you start trading, you need to expect how long it will take until prices hit your target levels. The pro traders never leave a trade open for an extended period when nothing happens; hence, they are using the capital in another trade. Having a plan will mean getting out again whenever trade does not look as expected and gets boring. It is never interesting for the traders to leave their capital stuck in a never-ending sideways price movement.
This is a crucial tactic when it comes to the management of risk. It means that you should sometimes get out of trades or split your exits into different amounts for different exit targets. For example, when you have planned to sell on a higher point in an uptrend, ensure you set the first target at a relatively slower security point where you will be taking the profit despite not being that much. It can be 30% of your position. After that, you can set another one or two targets each on a higher step.
The higher price levels can be hit if the markets do what you hope it would. However, when the price ought to reduce earlier before one or even two higher targets are hit, you will at least have taken profit at the first step, and you might be in a position of exiting early at the downward trend.
Learn to accept losses as part of the game
It would help if you never feared incurring losses. You must learn to keep a calm mind and understand that losses are always part of the game. The only thing you need to strive at as a trader is winning more than you lose.
Consider using stop losses
Pro traders usually use stop losses. Stop loss will rescue you from losing a lot in a single trade, despite having to lose at times, the losses are out to be controlled. It is with this control that you will ensure that you are still winning.
Being aware of your risk to reward ratio
A combination of three basic parts of trade, entry, exit target, and stop-loss, reveals your risk to reward ratio. The amount you can gain compared with how much you can lose. In crypto, the reward assumed needs to be several times higher than the risk. The profit awaited will always be a guess, depending on the TA. There can be profit targets looking likely within a certain period and distinguished on resistance levels and former highs.