Splitting your capital into 5 parts and making 20% deposits is a common risk management strategy, especially in volatile markets like crypto. Here’s how it works:
How to apply the rule:
1. Capital division: Take the total amount you are willing to invest and divide it into 5 equal parts. This means that each part represents 20% of the total.
2. First entry: Make an initial entry with 20% of the total capital. This avoids exposing all the capital at once, especially if the price drops soon after the entry.
3. Additional entries:
If the price drops, you use another portion (another 20%) to buy more, reducing the average entry price.
Continue making new entries gradually as the market moves, up to the limit of 5 purchases (100% of capital).
If the market rises after your first entry, you will already be positioned to take advantage of the appreciation.
Advantages of this approach:
Risk management: Do not expose all capital in a single operation.
Average price: Allows you to improve the average entry price, especially in cases of unexpected drops.
Discipline: Imposes an objective system for inputs, reducing emotional decisions.
Tips to improve the strategy:
Set clear criteria: Define in advance when you will make entries (for example, every 5% drop in price or after specific market events).
Stop making entries if the scenario changes: If the market shows signs of a complete reversal, consider pausing new entries.
Combine with stop loss: To protect capital, it is also important to define a maximum acceptable loss level.
**"Risk management is the key to successful investing! Dividing your capital into 5 parts and making 20% deposits at strategic times helps reduce risk and take advantage of market opportunities. Focus on the long term and maintain discipline! 🚀
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