10 tips for risk management.
What is Risk Management?
Risk management is a plan for trading that ensures that you do not make too much loss. Risk management is important for anyone who is trading in the digital finance markets. That goes for Crypto currencies, Forex and stocks. It also ensures that you don't stay in one position for too long. With a trade you quickly want your profit or loss to move on to the next trade. Risk means loss. so it is the same as loss management. In this blog we deal with risk management for traders in the crypto markets.
Why is a stop loss important for risk management?
Which wires should a stop loss use? But a stop loss must also be used well, which can be combined with your trading strategy. A stop loss ensures that you do not lose too much. For example, a stop loss can ensure that you do not end up with -40% on crypto trade. If you stay in a position for that long, it often takes a lot of time before you return to profit. Sometimes you can't even win anymore. That is why a stop loss is the most important part of trading.
The danger of trading without a stop loss.
If you do not use a stop loss in your risk management, you have lost risk management. If you start trading without a stop loss, you are betting on the price. You can never guarantee that your analysis is correct. If you use a stop loss you avoid large losses on a trade. You can also stay in position for a long time if you don't want to take your loss. Risk management is important for every trader.
10 tips for a stop loss and risk management.
1.) Set the stop loss on each trade.
A stop loss is necessary for good risk management. That is why your trade should always have a stop loss. This is also necessary if you have a lot of confidence in your trade. You can never be sure that the market will do what you want. It does not matter that your stop loss is still hit. Because the market can always go far away and you don't want to end up in a loss.
Therefore always use a stop loss. Trading on the crypto currency market is never allowed without a stop loss. Because with cryptocurrencies, the danger of trading without a stop loss is completely dangerous because the market moves a lot in the percentages there.
2.)Leave your Stop Loss.
If you are trading and the price goes to your stop loss. Never move your stop loss. Leave the stop loss where it is. That applies to everything you can trade. It's not for nothing that you placed your stop order there. The money with long and short orders. and also with take profits. If you don't know what long and short orders are. You can click here for a short explanation.
3.) Close your trades if you don't have a stop loss.
If you have opened a trade and you see that your trade is well into the loss because you have not used a stop loss. Do you want to know what's best for you? It is then wise to stop your crypto trade. Why should I close a losing trade? If you have a losing trade and it is far in veries, it is best to close it and learn from it. Once you've closed it, don't worry about the loss.
You can learn from it and still see it as a profit in that way. Because now you probably use a stop loss in the future trades you make. This is also useful for learning to trade because if you are far in the loss it can sometimes take a long time until you are in the profit again. Sometimes you may never get there or it may take a few years. And that is a sin. If you close the order you can continue trading and learn to trade. This way you can eventually catch up with this mega loss-making trade with the new profitable trades.
4.) Don't worry about your trade.
If you have a trade with entry, stop loss and take profit don't worry about what the price will do. If you are scalping or day trading you don't have to keep looking at the price action. Your trading strategy is probably good enough to make a profit. Close your chart program and go for a walk. Rest when trading is important, so you can better spot new trades and you are calmer so that you make fewer losing trades.
If your order is filled and you no longer look at the price, you worry less. Because if you have set up all orders, they will do everything for you. This prevents you from changing the data of the trade. This way you can also enjoy while trading.
5.) See if your RR ratio of your trade is worth it.
Your stop loss is almost all of your risk management. But risk management also has to do with profit, RR and PnL. Your RR is the Risk Reward. In your trading program there are order boxes with a green and red area. Click here to find out where this tool is in Trading View
An example: of what the RR is. If your take profit is at 4% and your stop loss is at 1% it means you have an RR of 4.0. This means that with this Risk reward you have to win 1 and 3 positions can be closed with the stop loss.
The Risk Reward must always be above 1.0 for a position to be worth it. so look at RR of at least a 1.8 That is the most commonly used format. The higher this number is, the better the trade.
6.) Look at your PNL across multiple trades.
Always keep an eye on your PnL. If you use risk management well, your PnL is in profit. That means you have made a profit on all trades.
Your PnL stands for Profit and Loss. It is the same as what the RR is but over multiple trades. Every trader also makes losing trades. If you focus on your PnL and ensure that it is positive, you will find that if that is good that the stop loss does not matter much anymore.
That doesn't mean you shouldn't do anything with your stop loss. If you know how to place these even better, your PnL will also go up. If you can also maximize your Take profit it will also become high. Trade profit is calculated by traders over multiple trades. Like all scalp and day trades throughout the month. So pay attention to your Profit and Loss
8.) Use a leverage calculator.
Use a levradge position calculator. It's also handy if you don't want to use levradge. You can fill in your Take profit, Stop loss and entry with the maximum loss you want to achieve on your entire position. This tool can ensure that your trades have good management. This way you know how much you earn and how much you lose. Do you use levradge? Then it is useful to use this for the security of your orders. Click here to go to this trading tool. It is currently still being made.
9.) Check your stop loss after the trade.
Once you've placed your trade and played it out, always look back into the past. You do that with the profitable trades and loss-making trades. Go see why your stop loss was good and where it was bad.
This way you can find out if you have put the stop loss in the wrong place. If you note the plus and minus points in your order diary you can easily learn from yourself to place it correctly. This way you get a Higher PnL and your RR can also become higher.
Write down the data and look after, for example, 10 trades in your order diary and try to find the errors. If you can solve the mistakes and you go through the steps again, you are guaranteed to get a better stop loss. If you want to read more about a stop loss, you can read more here.
10.) Use the best exchange for your trades
To be able to manage your risk well, a good exchange that clearly shows it is important. We have assessed various exchanges and have come to the conclusion that a good exchange ensures that you can better analyze your risk. There are more reasons why Bybit is the best exchange for crypto currencies. Below you will find the most important points for risk management for an crypto exchange.
If you click on the green button you can create an account at bybit and you have a chance to win $1500 from intertradeclub every month.
Clear view of your open and closed trades.
Bybit shows well which trades you have achieved with profit and loss and other information that is important to know. But if your trade is filled and you are in position you will see your position at the bottom of the trading screen. It also shows live where your Stoploss is, Take profit is, Entry point is and how much profit or loss you have at that moment. This is useful because you can easily see your risk. Also in the chart itself is this data showing the exchange.
Many options for trades.
Bybit has a lot of choice in orders for the entry, stop loss and take profit. It can be useful for experienced traders because it fits better with their trading plan. So you have a lot of choice. So all the options you are looking for can be found at Bybit.
Low trading costs.
Bybit is also low in cost. The costs are important for traders so that they place a lot of orders. Bybit has orders 0 fees on the spot! so the orders are free. On this platform. If you want to use levradge when trading you pay 0.06 fees. And that is also extremely low.