The main rule in risk management for investors is to invest only free funds. In addition to this rule, there are a few useful tips. Stick to them in trading and you won’t lose the deposit after 3-4 transactions.
Leave a 30% deposit to reserve
You should lay no more than 70% of the deposit on a series of transactions. Leave the rest of the funds for unforeseen cases. Remember that it’s impossible to reach 100% profitable trades. The stock market can go in any direction.
Keep the ratio of profit and loss 3:1
The cryptocurrency market is very dynamic. Don’t risk your deposit in a smaller ratio. For example, if the price of Bitcoin is $7,000, put a limit on losses at $6,800, and fix the profit at $7,600. In case the market goes down, you will lost only $200.
4% of the deposit per trade
Don’t put more than 4% deposit on one trade. Even if you have a clear market forecast. A small part of the deposit for the transaction will protect you against an unforeseen situation, but it won’t prevent from following your strategy.
Limit losses to 5% of the deposit
Buying Bitcoin at $7 000 with deposit about $10 000, put a limit at $6 500. We are talking about only the main part of the deposit.
Risk management is simple. Use this four principles, regardless of the market situation.
