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⚡️ Stop Loss and Deposit Management Rules

When we are dealing with such a volatile market as the cryptocurrency market, the most difficult task is to limit losses, and stop loss will help us with this.

A stop loss is an order to the broker to sell an asset when a certain price is reached. It is designed to limit the investor/trader's losses. Although most investors mean a long position when they talk about a stop loss, it can also be used to protect a short position - in which case the asset is bought when its price rises to a certain level.

Stop losses are very important.

Let's look at some options for using them:

1️⃣ Preserve your money . In this case, we prevent the loss of the initial investment by automatically liquidating the position (going into cash) as soon as the value drops to the purchase price (or slightly higher if you take into account the commissions).

2️⃣ Avoid going from a bad situation to a worse one. Here we are talking about limiting losses - you choose a level that is comfortable for you, and thus get some room to maneuver in anticipation that the asset will rise in price back.

Rules for deposit management.

We have realized the huge importance of stop losses, now let's learn how to place them.

Basic principles of effective deposit management:

1️⃣ An amount that you don't mind losing is allocated for trading. It shouldn't make a dent in your budget. Usually, it's about 10% of your monthly income;

2️⃣ Borrowed funds are prohibited. Trade only with your own capital;

3️⃣ Emotions will influence your trading. Your task is to learn to control them;

4️⃣ At the initial stage, it is better to exclude margin trading. Work on the spot market. You can switch to working with leverage at any time.

5️⃣ The leverage itself is safe. But there is a temptation to enter the market with a large volume. A beginner may not be able to cope with the temptation.

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