Risk management is a word that everyone who does trading, often hangs on the lips, but most people tend to just talk about risk management; Unable to actually establish the awareness of risk management, relying too much on intuitive trading, so that it is impossible to achieve long-term use of fixed trading strategies to achieve profit purposes.
Today I will share with you a systematic risk control concept. I hope it will be of some help to your futures trading in the future. Remember to forward and like it~ What should you pay attention to when trading futures?
First of all, the biggest advantage of futures trading is that small funds can be used as margin guarantee transactions, which can control risks more flexibly than spot prices; similarly, the biggest disadvantages of futures trading are the same as the advantages. While using leverage to amplify profits, you need to The risks taken will also be magnified in proportion;
Investors with poor trading experience often use leverage incorrectly (mainly referring to excessive magnification), coupled with psychological instability, they are prone to the following serious situations:
1. Wrong risk managementImproper use of leverage, or operations with a low winning rate or low profit-loss ratio;Many novices tend to ignore the advantages of using leverage, blindly use too high leverage, or too high number of contracts, focusing on the immediate potential profits and ignoring the potential risks brought by leveraged trading, which invisibly magnifies the risks, resulting in Positions are overexposed to risk and liquidated;
2. Immature mentalityLosing money or missing out on the market leads to greed, regret, fear and other negative psychological effects that affect judgment, making it impossible to operate according to the strategy;
3. Gambler’s psychologyAfter losing money in the market, you want to make back the loss through a larger margin. If you make a profit, you want to continue making profits with a larger position; There may also be another situation where the trend reversal is close to the stop loss, but because the position on the market is at a floating loss, you choose to continue to hold the position, going against the trend, resulting in amplified losses, or even liquidation; or when the price has reached a floating profit, The strategy has a profit-taking target, but due to greed, one chooses to continue holding the position, causing the original profit to be taken back or even turn into a loss; In the trading market, retail investors often make too many mistakes and get lost in technical analysis. They pursue the perfect strategy with a 100% winning rate and ignore the implementation of the general principle of stop-profit and stop-loss.
What is risk? Risk is the uncertainty of future investment returns in the trading market. Loss of income, or loss of principal, can be included in investment risk. The characteristics of risk include objective probability, meaning that the risk can be taken to prevent the occurrence, or reduce the loss caused by the occurrence of a risky event, but it is impossible to completely eliminate the risk, because to do so means that we will also eliminate the future gain. This also shows that risk management in the trading market is very necessary and very important.
What is risk management? Risk management and control means taking effective measures to reduce the probability of occurrence of risk events, or effectively reduce the loss caused by risk events after the occurrence of risk events, and control the loss to an acceptable degree. Traders with less trading experience tend to focus too much on technical analysis and trading strategies, and place too much trust in strategic indicators. These traders often inadvertently ignore the probability of the occurrence of risk events, the entire principal as a margin to make a one-time bet trading, such traders, the final result is only death.
Importance of profit-loss ratio
A profit-loss ratio that is too low will result in more losses and less profit.Assuming that our risk management strategy is to set the profit-loss ratio of each transaction to 1:1, we must at least maintain the winning rate of the transaction above 50% to ensure stable profits for the position;If the profit and loss ratio is set to 1:1, for any transaction we should ensure that the profit and loss ratio is greater than or equal to 1:1 before entering the market. Otherwise, even if the winning rate is high, the effective profit and loss ratio cannot be achieved. It may also cause a large profit retracement or even loss after a loss occurs.
A higher profit-loss ratio in the trading strategy can effectively make up for the problem of lower than 50% winning rate in trading;
for example: In an account with 10,000 USDT, each transaction uses 1% of the position as the cost (100 USDT), and the profit and loss ratio is controlled at 1:3. In 10 transactions, there will be an average of 4 take-profits and the remaining 6 losses. purely looking at the winning rate, the trading winning rate is only 40%. Such a result is definitely unsatisfactory.
However, based on the profit-loss ratio combined with the winning rate, the average overall profit for 10 transactions falls within:(100USDT (1% cost)*3 (profit-loss ratio)*4 profits) — (100USDT (1% cost)*1*6 losses)=1200USDT-600USDT=600USDT
We can see that with a trading strategy that controls the profit and loss ratio at 1:3 each time and uses 1% of the total position as a cost, although the winning rate is only 40%, we can also get a 6% return in every 10 transactions. The most important thing is that even if a loss occurs, only 1% of the positions bear the risk of loss.
This is also why we pursue a high profit-loss ratio. Only a high profit-loss ratio + a high winning rate can achieve effective compound interest.
Summarize
In the trading market, risk management accounts for at least 80% of the importance, and the remaining 20% is the trading system and strategy. Avoid blindly pursuing technical analysis and indicators, strictly implement basic skills and risk control, and avoid gambling operations such as heavy positions and full positions. The long-term stability of position funds is the correct trading direction.
The futures market is highly volatile. It is recommended that investors strictly implement risk management. Only by surviving in the trading market can we have the opportunity to achieve more trading goals.
📊#BTC failed to break through, beware of pullbacks⚠️
🧠Yesterday, I found signs of stabilization near 109500 and closed my short position and went long because I was worried that we would break through the resistance area near 110000. As a result, the market developed as expected and we successfully broke through, but unfortunately we did not stabilize above the resistance area of 110000.
➡️From a graphical point of view, we formed an extended wedge near the resistance area, and we have now fallen through this pattern, which is about $400 away from the support near 107000 that I want to focus on, so I missed this rebound space.
➡️Currently we are blocked by the downward trend line. Only if we break through here and stabilize, can we see a big surge.
⚠️Note that we have tested the support near 107000 many times. If we fall below here, we will see further pullbacks.
Let's see👀
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📊#BTC reaches the target area, beware of pullbacks⚠️
🧠From a structural point of view, we have support near H1, and built a bullish head and shoulders structure, and broke through the downward trend line, so it is very reasonable to have such a rise.
➡️Unfortunately, the price did not reach the 105,000 support that I wanted to pay attention to, and this rise happened when I was sleeping, so I missed it.
➡️But now the price has reached the 110,000 pressure area that I am concerned about, and has reached the target area of the bullish head and shoulders structure. So I will not chase the rise in the resistance area, but I will look for some shorting opportunities.
⚠️Note that the main trend is long, so shorting is a counter-trend transaction, and we need to be cautious. Try to pay attention to the opportunity to go long on the pullback. The more aggressive support is near 108,000, and the more conservative support is near H1. It has been tested twice here. Will it be tested for the third time?
Let's see👀
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🧠From a structural perspective, we have reached the target area of the bullish cup-with-handle structure, so we need to be vigilant about the occurrence of a pullback.
➡️From a graphical perspective, we have formed a rising wedge near the red resistance area, which is generally regarded as a bearish model.
➡️If the rising trend support line does not hold and falls directly, then we can also expect further declines to occur
⚠️Note that counter-trend trading in an uptrend must be risk-managed.
Let's see👀
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🧠From a structural point of view, we have a bullish head and shoulders structure constructed near the uptrend support line and the yellow support zone, so we expect a nice upside to come.
Let's see👀
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📊#BTC bullish structure is broken, beware of pullback!
🧠The target of the ascending triangle is achieved and it falls below the turning point of the bullish structure at 102561, which means that the upward trend is likely to end. The bullish structure is broken, which means that the probability of continued rise has become lower. Therefore, we can wait for a rebound before looking for short opportunities.
➡️The support near 100700 has never been tested, which is worth our attention.
Let's take a look 👀
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🧠Currently in the resistance zone, but the trend direction is bullish. We are doing narrow fluctuations in the range of 91800-95000. There are some contradictions between the long and short positions here. If we want to participate in new transactions, we must wait until the absolute support and resistance levels.
➡️If it falls below the first support zone near 91800, then we need to pay attention to the second support zone of 88000-89000
➡️We need to wait for the structure to become clearer before looking for new trading opportunities.
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🧠As time goes by, the price is gradually compressed and forms an ascending triangle. We need to observe the breakout opportunities on either side to decide what to do.
➡️The trading volume is relatively low over the weekend. In the absence of market volatility, we still wait and see, patiently waiting for the right opportunity to appear.
➡️I wanted to participate in some long trades today, but the price did not reach the overlapping support area quickly, and this support area is also time-limited. Once it exceeds the expected time range, the effectiveness of the support area will decrease, so I decided to cancel the long limit order.
⚠️Be patient!
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🧠From a structural perspective, the goals of the bullish structure have all been achieved, and the target area overlaps with the blue resistance area, and we have built a bearish double top structure in the overlapping resistance area, so we are likely to enter the adjustment phase, be cautious about bullishness!
Let's see 👀
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🧠From a structural point of view, we are currently in the resistance zone at the daily level, so it is reasonable that we have been consolidating here for a long time.
➡️From a graphical point of view, we have formed an ascending ascending triangle here. Generally, we continue to rise according to this model, and it is also regarded as a signal that the trend is about to end, so we can pay attention to the short-selling opportunities in the red target area above.
⚠️Note that if we fall below the turning point 83675 in advance, the expectation of continued rise will be invalid, and we can pay attention to the short-selling opportunities when we rebound to the blue resistance area again.
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📊#BTC in the resistance zone, beware of pullbacks📉
🧠From a structural perspective, we are currently in the blue resistance zone at the daily level, so we need to pay attention to the risk of a pullback if we cannot break through this area.
➡️The upward trend support line was broken, so it turned into a resistance line. The price reacted well when it touched this resistance line, so we need to pay attention to the suppression of this resistance line.
➡️The downward trend line at the daily level was broken, which means that the adjustment at the daily level may be over, so if there is a good pullback, then we need to look for opportunities for long trades. The support area worth our attention is 80000-81188.
⚠️Note that if the closing price at the 4h level is below 80000, then the market may go bad and we may enter a deeper adjustment.
Let's see👀
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🧠From a structural perspective, we are still in a bearish structure and have not successfully broken through the downward trend line, so the risk of further downside is still not eliminated.
➡️Currently we are in a complex consolidation phase between the blue resistance zone and the green buy zone, so we should remain cautious in the face of ups and downs.
➡️Patience and wait for trading opportunities to appear after either side breaks through.
Let's see 👀
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🧠From a structural perspective, the weekly and monthly uptrends are still intact, so the bull market is not over yet, so I labeled this analysis "LONG". Unless a weekly short structure is built, I think we still have a chance to see 132k-175k.
➡️From a cyclical perspective, we are currently entering a daily adjustment phase. The daily structure cannot change the weekly and monthly uptrends, and we are expected to maintain a complex consolidation for another 5 months, and we may see the results in September.
➡️The current daily downtrend has not ended, and it is approaching the overlapping blue resistance area. Don't go bullish against the pressure. If the weekly closing price in the future can be higher than the overlapping resistance area, then the resistance will turn into support. Only when you step back to this area again can you look for opportunities to go long, otherwise you need to pay attention to the long opportunities in the yellow support area below.
Let's see👀
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🧠From a structural perspective, the risk of further decline has not been lifted, because the short structure at the daily level is still intact and the downward trend line has not been effectively broken, so the next period of time is likely to be dominated by complex consolidation.
➡️If we can successfully break through the inflection point 99425 or the downward trend line, it means that the short structure is broken, and we can find the right opportunity to actively participate in long-long transactions in the subsequent callback, otherwise we still need to be vigilant about the risk of further decline.
Let's see 👀
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📊#BTC reaches overlapping support zone, beware of rebound⚠️
🧠From a structural perspective, the highs are falling and the lows are falling, so we are still in this downtrend. But we just touched the overlapping support zone, so there is an expectation of rebound, be cautious about bearish! A more accurate bullish signal can focus on whether the long structure here is established.
➡️From a graphical perspective, we formed a descending wedge near the support zone, and we generally start to rise according to this model.
Let's see👀
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🧠From a structural perspective, we are still in a downward trend. Before the downward trend line is broken, we still have the possibility of further decline. 2700-2900 is a short-term support-resistance conversion zone. If your entry point is near this and the position ratio is relatively heavy, you can consider reducing some of your holdings when the price returns here again.
➡️We have a strong rebound after touching the upward trend support line. If we can build a reversal structure of the same cycle near this support line, then we will most likely usher in a new surge. The complex consolidation phase may last until the end of this month or even next month.
➡️Since I already hold 80% of my ETH holdings, I will consider buying the remaining 20% at a lower price (around 1700). My current holding cost is around 2480. If you don’t have any positions, you can buy some around 2200 and wait patiently.
⚠️Note that it is best to use the DCA trading method for spot trading, and you need to be patient enough☕️
Let's see👀
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🧠From the perspective of the chart, the price is gradually being compressed to form an ascending triangle. We can pay attention to the support of the lower edge of the triangle to participate in some long transactions.
⚠️If the yellow turning point is broken, it means that the ascending triangle is invalid
Let's see👀
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🧠From the perspective of the chart, the price is gradually being compressed to form a triangle. Because this model is formed in an upward trend, we define it as an ascending triangle.
➡️If the price approaches the lower edge of the triangle and does not break the low point (L), then we can continue to be bullish, otherwise we need to wait for a lower position.
➡️If we go out of the black path, then the pullback after we break through the blue turning point is also a new long participation opportunity
Let's see👀
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🧠From a structural point of view, we have reached the resistance zone again. Only if we continue to hit a record high and then pull back can we maintain a positive attitude to be bullish, because the second goal at the weekly level has been fully achieved, so we need to be wary of the corresponding cycle adjustment.
➡️If we fall below the rising trend support line and build a short structure at the 4h level, then we need to be cautious. It may be wise to watch more and do less during this period, and try to control the position risk.
Let's see👀
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🧠From a structural perspective, we have reached overlapping resistance zones, so we need to be alert to the risk of a pullback. This upward trend is difficult to reach a new all-time high because there is no bullish structure to support it, so it is highly likely that it will maintain a complex horizontal consolidation, so wait patiently for a pullback opportunity before considering going long.
Let's see👀
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