Cryptocurrency and Digital tokens are highly risky; investors may lose all their investment money. Investors should study all the information carefully and make investments according to their own risk profile.

As before I said, 4 out of 10 trades will hit Stop loss, so we should manage our risk while trading otherwise we will end up in loss.

There are some important rules which should always be followed during trading:

1. Always Use Stop Loss:

Always practice putting Stop loss in your trades. The one who doesn’t put stop loss is just a dumb or foolish. Stop loss always protects you from being getting liquidated.

2. Don’t Put All In One Trade:

Remember, don’t try to be over smart by putting all of your portfolio into single asset/trade. Divide your portfolio into different portions & invest accordingly.

3. The 1% Rule:

This is the most important rule that every trader or investor should be remembered. Most of the people don’t understand it clearly. This rule defines as “You should always risk only 1% of your portfolio into single trade”. Most traders think they should invest only 1% of their portfolio in single trade or they think that they should put their stop loss 1% beyond their entry but it’s not like that. This rule means that you should always put such amount in a single trade that if your stop loss hits, wherever you’ve set your stop loss, you lose just your 1% of the portfolio & not more than that.

4. The Formula:

There’s a simple formula to calculate that if you’re about to take a trade, how much amount you should invest that if your stop loss hits, you lose only 1% of your portfolio.

Capital (your portfolio size) x risk(in %) / stop loss(in %)

Now lets have a example,

you’ve a portfolio of 1000 usd, you’re about to enter the trade in which you want that if stop loss hits, you lose 1% of your portfolio & you’ve put your stop loss 3% beyond the entry & your take profit at 7%, so by using formula:

1000x 1/3= 333 usd approx.

So, you will enter the trade with the amount of 333 usd, so that if your stop loss hits you lose 10 usd(1%) of your portfolio & If your Tp hits you’ll get 23 usd.

Related Queries:

  • Risk Management
  • Always Use Stop Loss
  • Don't Put All In One Trade
  • The 1% Rule
  • Formula of Risk Management
  • Portfolio Size
  • Capital

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