Saturday March 06, 2021
Bitcoin (BTC) $49,025.00   Ether (ETH) $1,595.60
  • Events
  • News
    • Blockchain Technology
    • Capital Raising
    • Crypto Exchanges
    • Crypto Payments
    • Gaming & Betting
    • Networks & Protocols
    • Security
    • Vendor Technology
    • Wallets
NEWSLETTER SIGNUP
EXCHANGE 300+ COINS
CryptoNinjas
  • Crypto & Blockchain Links
  • Real-Time Market Data
  • Bitcoin ATM Map
  • Token Offerings/Listings
No Result
View All Result
CryptoNinjas
No Result
View All Result
Home Crypto Exchanges Trading

3 Risk Management Techniques for Cryptocurrency Trading

Published by CryptoNinjas.net
09/08/2020

Trading cryptocurrency is an activity that is increasingly become the norm, with countless individuals trading crypto in an attempt to generate consistent returns from the market. A large part about being a successful cryptocurrency trader is being aware of risk management. Practicing proper risk management can be the difference between generating very high consistent returns and losing everything. In this article, we will explore some popular risk management techniques that you can be using in your trading.

Stop Losses and Take Profit Targets

The first risk management technique that all traders should be practicing is setting stop loss and take profit targets. Stop losses are important because they prevent the risk of more severe losses in the event that a trade does not go your way. In a similar vein, take profit targets are vital for traders because traders need to be aware of the price at which they are willing to take profit on their trade. Not planning the stop loss and take profit targets can be disastrous for traders because they are likely to fall prey to emotional trading. For example, if no stop loss is set, it is possible that a trader will be unwilling to cut their losses and exit a trade because they think that the price will rebound in their favour. Crypto trading bots and signal groups (e.g. crypto signals) are useful tools in allowing traders to set their stop loss and take profit target before entering into a trade.

Position Sizing

This is another important risk management technique that all traders should be practicing. The theory behind position sizing is that a trader should not risk more than 1% of their trading account on any one single trade. For example. If a trader goes on a 10-trade losing streak, he or she will still have 90% of their trading portfolio. Furthermore, because the trader is fixed at 1% they will be using a lower proportion of their trading balance if they were to go on a losing streak. In contrast, if a trader is doing well and goes on a 10-trade winning streak, you will be using a higher proportion of your trading balance as it grows.

Risk/Reward Ratio

Being able to determine the risk to reward ratio of a trade before it is placed is also vital to be a successful trader. If a trader can determine the expected return of a trade compared to the risks, then they are much more likely to only take trades with a higher probability for success. Meaning that in the long term, you should be trading at a net positive.

The risk to reward formula is as follows: (Target – entry)/(entry – stop loss)

You can also use the below as a rough guide for determining the risk to reward of a trade:

  • If it’s lower than 1:1 never place a trade
  • 1:1 is breakeven
  • 1:2 is great to trade
  • 1:3 is even better and is an ideal ratio

Conclusion

Risk management is the first important step in being a successful trader, and as a result, it should be taken seriously by beginner traders. These are just a few techniques that one can be using in their trading. There are a lot more risk management techniques out there, so make sure that you are aware of the most crucial ones.

FacebookTwitterLinkedinRedditE-MailTelegram

Related News

Bitcoin DeFi platform Sovryn reveals $1.25M bug bounty; raises $10M in token presale
Security

Bitcoin DeFi platform Sovryn reveals $1.25M bug bounty; raises $10M in token presale

03/05/2021
P2P crypto escrow platform Escaroo adds staking function from Moonstake
Strategic Integration

P2P crypto escrow platform Escaroo adds staking function from Moonstake

03/05/2021
SecondState launches Ethereum compatible ParaTime on the Oasis blockchain
Networks & Protocols

SecondState launches Ethereum compatible ParaTime on the Oasis blockchain

03/05/2021
NFT platform Curio closes seed funding of $1.2M to fuel expansion
Capital Raising

NFT platform Curio closes seed funding of $1.2M to fuel expansion

03/05/2021
IOTA token added as collateral asset on Bitfinex Borrow
Crypto Exchanges

IOTA token added as collateral asset on Bitfinex Borrow

03/05/2021
Load More
Leave Comment

Where to Exchange

Bit2MeLeading Spanish Bitcoin ExchangeVisit
BL3P
European Bitcoin ExchangeVisit
ChangellyExchange & Buy 150+ CryptocurrenciesVisit
itBitAmerica's First Regulated Bitcoin ExchangeVisit
  • Trending
  • Latest
Enjin launching two scaling solutions to remove gas and support NFTs from any blockchain

Enjin launching two scaling solutions to remove gas and support NFTs from any blockchain

03/04/2021
Creators of crypto wallet Exodus files with SEC to allow purchase of its stock with bitcoin

Creators of crypto wallet Exodus file with SEC for $75M public offering

03/03/2021
SIMBA Chain expands to Avalanche blockchain enabling low-code smart contract deployment

SIMBA Chain expands to Avalanche blockchain enabling low-code smart contract deployment

03/02/2021
Canadian bitcoin exchange CoinSmart raises $3.5M to expand into Europe

Canadian bitcoin exchange CoinSmart raises $3.5M to expand into Europe

03/01/2021
DeFi yield optimization protocol ETHA Lend closes $1.6M funding round

DeFi yield optimization protocol ETHA Lend closes $1.6M funding round

03/04/2021
Bitcoin DeFi platform Sovryn reveals $1.25M bug bounty; raises $10M in token presale

Bitcoin DeFi platform Sovryn reveals $1.25M bug bounty; raises $10M in token presale

03/05/2021
P2P crypto escrow platform Escaroo adds staking function from Moonstake

P2P crypto escrow platform Escaroo adds staking function from Moonstake

03/05/2021
SecondState launches Ethereum compatible ParaTime on the Oasis blockchain

SecondState launches Ethereum compatible ParaTime on the Oasis blockchain

03/05/2021
NFT platform Curio closes seed funding of $1.2M to fuel expansion

NFT platform Curio closes seed funding of $1.2M to fuel expansion

03/05/2021
IOTA token added as collateral asset on Bitfinex Borrow

IOTA token added as collateral asset on Bitfinex Borrow

03/05/2021
  • Home
  • Directory
  • Data
  • About
  • Contact
SUBSCRIBE

© 2016 - 2021 CryptoNinjas Disclosures | Privacy Policy

  • Home
  • Crypto Links
  • Market Data
  • Blockchain Tech
  • Exchanges
  • Capital Raising
  • Vendor Technology
  • Token Offerings/Listings
  • Payments
  • Wallets
  • Bitcoin ATM Map
  • Conferences & Events
  • About
  • Contact

© 2016 - 2021 CryptoNinjas Disclosures | Privacy Policy


Go to mobile version