- No risk, no reward. But taking on more risk than one can bear can lead to disaster.
- Defined risk per trade and stop losses just beyond invalidation levels is the core tenet of risk management.
- Taking trades that adequately compensate traders for the risk they take on is the best way to sensibly deploy capital.
- Once a trader builds experience, they can exercise less discipline and employ a dynamic risk management framework.
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The first step to becoming a profitable Bitcoin trader is following a disciplined approach to risk management. In this guide, Crypto Briefing outlines some risk management tactics that will go a long way in boosting profitability.
No Reward Without Risk
Risk and reward are two sides of the same coin.
But every trader – retail or institutional – has a risk appetite that is defined by various parameters, such as the size of one’s investment corpus, income levels, age, and other factors.
Knowing how to evaluate your risk profile is the cornerstone of managing risk.
Taking on risks that are beyond one’s threshold is a recipe for disaster. Losses can compound quickly, wiping out whole trading accounts.
This happens far too often – especially in crypto.
Copying the risk management parameters of traders on social media can also devastate trading accounts. This only makes sense if one has a similar background and risk threshold as the trader they’re imitating.
A trader whose standard position size is $100 cannot emulate the risk management of a trader who actively opens $100,000 positions.
Without risk management, it’s impossible to become profitable. This is because profitable traders let their winning positions roll and cut their losses early.
In this guide, Crypto Briefing will lay out a basic…