This week we did a stream with Anton Hexdrunker from the DoubleTopTraders team. On the stream, we discussed the most frequently asked questions about trading – how to manage your risks, how to deal with greed and phomoeba, correctly take profits and much more. Perhaps we will even make it a regular rubric.
For those who do not have time to watch the stream, we have prepared a short summary, selecting interesting answers and reflections from the stream, which can be useful to both beginners and traders.
Why is risk management (RM) so important?
Whatever trading strategy you have: scalping, pharming, medium-long-term trading or pharming – everything should rest on competent risk management. No signal, trade or smart idea can guarantee 100% completion.
Even if you are sure of a particular deal and before that it worked out well, there can always be a “Black Swan” from where, from where you do not expect it at all.
So, for example, you are short on bitcoin and expect a certain level to which the price is more likely to reach in the near future. While the position is open, you are distracted, and at this moment one tweet by Elon Musk pampits Bitcoin for $ 10 thousand within an hour. Without a competent RM, this would lead to significant losses of the deposit.
How to use RM
Risk management is the grail.
First of all, determine for yourself what you plan to do and what to focus on.
Let’s take 100% of the deposit and divide it into the following categories:
- HODL (long-term investment) – these can be investments in projects from which you expect some events, news, or there can be just long-term positions in anticipation of the growth of a particular cryptocurrency. You can allocate 40% of the deposit.
- Investments – this can be sales, ICO, IDO, IEO, launchpools and pharma, etc. – 25%.
- Trading – you can allocate 10% of your deposit and set risks there as well. Let’s say, when trading 10 leverage futures, you trade 100% of your deposit.
- Ideas are mostly about finding interesting projects for investment with the expectation of good profits in a short period of time. Also highlight 25%.
If you have a small deposit, then some categories can be excluded from this. Hodl with a small deposit will not bring quick profits and tangible profits, so you can focus more on investing in ICO, IEO, IDO, etc.
Risk management in crypto can be compared to poker. If a player has $ 1000, he or she in his right mind would not understand playing a $ 1000 tournament. The player must understand how many games he can have unprofitable and how many games will allow him to make a profit. And often it is 1-2% of the bankroll. That is, the player risks losing only $ 10 and winning $ 1000. Since tournaments are not often won, risk management must always be respected.
There are risks in any area of life, but in trading they are increased and here it is worth approaching with increased responsibility.
Basic rules for RM.
How to deal with FOMO?
Fear of missing out (FoMO) is a missed profit syndrome or obsessive fear of missing an interesting event or good opportunity.
In the current market, you should understand that you won’t be able to make all the money. Nowadays many altos are shooting and showing good profits. The most important thing is not to lose what is yours.
Also, do not worry, let alone catch FOMO looking at xx stories that you didn’t even think about. Why burden yourself with extra FOMO, if you didn’t even know about some project that came out on xx or didn’t see the chart or me for opening a position.
You should not look at the graph of what has already flown away – it no longer makes sense, since it will already be difficult to find a good entry point.
It is always worth remembering that 95-98% of people in the market only lose money.
Fix and withdraw part of the profit in fiat money. Make it a rule to withdraw money at least on some day of the month or once every couple of months. This will make you feel the money earned in the market.
Trading VS HODL
In a bull market, and especially when it comes to such a rush and projects show tenfold profit, of course, it is more profitable to sit on spot positions.
The current market is very volatile and trading on the same futures is very problematic. Even holding a long position, which shows a crazy x, you can still be knocked out by the stop of one candlestick.
As soon as the market turns around, the HODL strategy will be useless, since there will be no rush, and many investors will simply take profits until the rate drops to oversold values. This was the main mistake many of the 2017 bullarn holders made. And those who entered at the peak of the market lost over 90% of the deposit in the first year.
Double Top Traders maintain their own blog on a medium, in which they analyze projects, talk about various patterns, and explain complex things in simple language. There you will find many useful materials.
We recommend that you take the time to watch the stream, there is a lot of useful information that novice traders or investors need to know.