Everything you want to know about risk management but are too afraid to ask

Recently, we have focused on giving you less CTAs to be more protective. So far, this approach has worked out fantastically. All September CTAs were profitable. We know you might think: “Why don’t they post as many CTAs as they used to?!: The reason is simple - it works!

Do not overtrade

In speculative trading — and trading crypto is speculative - protecting your capital is more important than generating lots of profits. Having said that, you need to understand that no trading at all is sometimes better than overtrading. Especially, in times like these where the indicators sometimes give us mixed signals, it is very important to be mindful with your trading and also have the patience to stay in a sideline position until we can clearly spot an opportunity.

With how much of your portfolio should you enter a trade?

Professional traders usually use less than 1% of their portfolio for a single trade. However, you are responsible for your own risk management and we are not going to dictate any numbers to you. We are realistic enough to know that 1% of your portfolio for a single trade will not be satisfying for you. However, we want to remind you to stay away from risking too much of you capital for a single trade!

Diversify

In crypto investments diversification makes sense. This is how we minimize risk and maximize the chance of finding the next big thing when it comes to long term investments. However, when trading cryptos it is a bit different. We can open 20 trades with 20 different altcoins but when BTC decides to dump, all open altcoin trades will be in a loss. As long as we have the BTC/altcoin correlation, altcoin trading will always be risky, especially in a bearish market like nowadays.

Instead of opening 10 trades a day and facing the danger of BTC destroying all trades with a single move, we’d rather be selective and focus on shorting the market.

How to minimize risk when trading without a stop loss?

The answer is very simple — decrease your position size. Instead of using for example 2% of your portfolio for a single trade, you could use 1%. This will automatically reduce your risk and it is very simple. There are fancy things to do in trading — but we suggest to pay attention to the simple things which can already help you establishing the right mindset and strategy.

How to use FA based investment recommendations in a bear market?

To keep it simple - only a very few coins will be profitable during a long term downwards period (e.g. HOLOCHAIN, our true gem). So, if you see us making a new FA based recommendation, do not jump all-in. Set an amount (BTC or USD value) you want to spend on the specific coin and from there you need to ladder your buys. This ensures that you will get a good average buy price for the asset.

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