In cryptocurrency spot investments, setting take-profit and stop-loss is a crucial operational strategy.
Setting stop-loss based on breakthrough support or resistance levels is like a basic rule in the cryptocurrency spot market. Whether it is day trading, short-term operations, or swing and medium to long-term investments, this method is applicable. For example, when judging the price trend of a certain coin, if you buy at a support level and the price falls below this support level, you should stop-loss; conversely, when selling at a resistance level, you should transfer. However, the premise of using this method is to accurately judge support and resistance levels, which requires investors to have a deep understanding of the market and rich experience.
Using the amount of capital for stop-loss is also an effective method. Before each trade, you should clarify how much loss you can tolerate at most. This is similar to the concept of capital management I mentioned in a previous spot trading course, where traders need to plan their take-profit and stop-loss points according to their own trading win rate. For example, if you operate multiple times, and there is a certain ratio of profit and stop-loss occurrences, and the number of points for take-profit and stop-loss is also determined, then as long as the overall result is profitable, it is feasible. Based on this foundation, even if you earn 3% of your capital daily, after a year, it could be nearly ten times the profit, with the only prerequisite being that you can maintain your original intention.
Setting stop-loss based on time is also very common in the cryptocurrency space. For example, for short-term investments, you can set a stop-loss point at 3% and a take-profit point at 8%; for medium to long-term investments, the stop-loss point can be set at 5% and the take-profit point at 15%. This is based on planning the ratio of risk and return according to different investment cycles.
Setting stop-loss based on capital management starts from the investor's risk tolerance and capital scale. If the investor has a low risk tolerance, like those inexperienced newcomers with limited capital, they should choose smaller stop-loss and take-profit points; while investors with substantial capital who can tolerate larger price fluctuations can set larger stop-loss and take-profit points, or even just need to choose a good time to build a position, and profit becomes just a matter of time, without needing to worry about take-profit or stop-loss.
There are also some considerations when setting stop-loss and take-profit. Different spot varieties have different price fluctuation characteristics and amplitudes, and the various coins in the cryptocurrency space are no exception. You need to adjust the stop-loss and take-profit points according to the specific situation. You cannot choose a niche altcoin thinking you can open a short position and then set stop-loss and take-profit, only to be trapped just a few seconds after opening the position; that is merely giving away money. Moreover, the market situation is complex and ever-changing; investors need to adjust flexibly, strictly execute what is set, not be influenced by emotions, and regularly evaluate the effectiveness of the strategy.
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