š§ Risk management in trading
Let's discuss the key component of successful trading - risk management. It helps you manage your capital and minimize losses while maintaining the maximum possible profit.
1. Risk percentage of the deposit
Determine the maximum percentage of your deposit that you are willing to risk on one trade. Typically, traders risk 1-2% of their trading capital per trade.
Example: If your deposit is $1000 and you set the risk level to 2%, then the maximum loss in one trade should not exceed $20.
2. Determining the stop loss level
Stop loss (stop order) is a price level at which the transaction is automatically closed to avoid further losses. It is calculated based on your risk level and position size.
Example: If you enter a position at a coin price of $100 and are willing to risk no more than $20, then your stop loss should be set at $80 (if a long position).
3. Risk-reward ratio
The risk/reward ratio will show whether the trade is worth entering. The standard is considered to be at least 1 in 3, which means the potential return is 3 times the risk.
Take profit is a predetermined price level, upon reaching which an open trading position is automatically closed with a profit.
Example: By risking $20 (stop loss), you expect to make a profit of at least $60 (take profit).
4. Emotional control
Stay calm and follow your trading plan whether you are facing losses or making profits. Emotions are the enemy of a trader!
5. Analysis of past transactions
Regularly review and analyze your past transactions. Study both successful and unsuccessful trading examples to identify mistakes and enhance your success.
š Important note: Successful risk management implies discipline and following the rules you set.
Never risk funds that you cannot afford to lose.
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