Risk Management: What Is It and Why Should I Use It in Trading? | CoinMarketCap

Do you call yourself a brave trader? 😉 Although your trading ideas (what you hope happens) are important, you should have plans in place if the trade turns against you. Here's why you need to pay attention to crypto risk management 👇

to survive in the long run. In that spirit, today’s article dives deeper into risk management and finds the perfect balance between risk and reward for crypto traders.

As we discussed last week, sometimes trading is more about survival than making money. By managing your losses, you are protecting yourself against adverse market events. A lower risk will also limit the size of your wins, but if you build your account slowly, the compounding effects will kick in eventually.How much money are you willing to risk on a single trade? Let’s look at them one by one.

It is important to define how much money you will risk. We often use the following example: a losing trade should be similar to the amount that could buy you and your significant other a dinner out in your town. If we look at Jake’s decisions, we can easily calculate the portfolio size he needs. By multiplying his maximum losses by 100, he learns that he will need to fund his portfolio by $10,000.

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