Best Crypto Trading Strategy Using Risk Management

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Written By chrisekai

Crypto Risk management is an essential part of trading. Risk management enables you to concentrate on the critical things and away from the worries that have no meaning. There are many risks involved in trading, but they can be managed well with experience and patience. Many people have heard stories of successful traders who got lucky. Some trade based on luck, while others do it properly and follow a proper plan. It is not a problem to be lucky as long as you are prepared. The important thing is “How do I manage my risk” and where to find the signal?

Consider the following scenario: assume we are going to trade digital currencies. Crypto trading involves two options; buy or sell. For any possibility of profit in cryptocurrency trading it. It is always an assumption, and there is a risk attached to this. Let’s say we are going to buy Cryptocurrencies.

An assumption on which you will profit from buying this cryptocurrency is that it would increase in value. It is like the stock market. When purchasing a counter in the stock market, you are banking on its value increases with time. In crypto trading, we bank on the price increase for many reasons, including hype around an upcoming ICO launch, news about a new Exchange listing, or an upcoming fork. We anticipate that the price would increase and that, in turn, would generate profit or a significant financial wallet.

Now, for cryptocurrency trading, what are the risks we might face?

What risk management strategies can we use to create profits? Risk management strategies will enable the trader to gain ground on crypto trading. Risk management is a guide and pointers on how to manage risk while trading in cryptocurrencies. It can be referred to as risk control guidelines. The primary aim is to eliminate the trepidation that might cause severe loss to the trader and their capital. You may ask, what is there any fear involved? Well, let us check risk management strategies that always have the potential to benefit traders.

Multiple Time Frames Buy and Sell Risk Strategy.

The crypto market exchange is so volatile that many traders may feel like they are trying to balance on a tightrope without a safety net. The key to success in this environment is making sure you have the right risk management strategies in place. However, for those strategies to work, you need first to understand what they are and how they work.

First off, multiple time frame analysis helps avoid tunnel vision by looking at the big picture of the trend instead of just one time-frame. Secondly, it’s essential not to be too aggressive when sizing your trades with small stop losses, or else you might end up getting stopped out before any real opportunity presents itself. Thirdly, make sure your target prices don’t move against you by more than two times your initial stop loss.

It is a risk management strategy used to help avoid losing too much of your account balance in case the market moves against you on one or multiple trades. It helps prevent you from being wiped out and needing to start all over again by having your profits protect your losses.

This strategy is usually used when trading extensive time frames like daily, weekly, and so on. The idea is that you should always have some part of your overall account balance in cash while keeping another portion in your trades. This way, if all your transactions go against you, then at least you will still have some money to start over again.

Keep in mind, however, that this doesn’t protect you from a market crash. For example, if all the coins fall in value simultaneously, you won’t have any money to trade again because all of your liquid assets will be gone. Therefore, make sure not to keep all your cash on an exchange but instead store it in a safe place.

There are two prevalent methods for implementing the above risk management strategy: trailing stop loss and time-based. First off, let’s see the trailing stop loss. In this method, you set your initial stop loss an appropriate amount below the market price. Then as the price falls, your stop loss naturally gets dragged along with it. Eventually, the trade will be stopped if the price drops and hits your new stop loss level. Any profits you’ve made are now protected because even though the market didn’t continue its upward movement, at least you still got out with some of your initial investment intact.

Second, there’s time-based. In this method, your stop-loss dragged along with the price. Instead, you specify a certain amount of time, and if the market falls below that point in time, it gets stopped out whether or not the price continues to drop. Time-based trailing stops are similar to conventional trailing stops except that the stop-loss level is changed after a specified time.

Some traders use both methods to give them additional flexibility when trading multiple coins on different timeframes to take advantage of the significant market moves and still protect their account balance at the same time. There are various ways to implement this strategy, but the essential aspect is understanding how it works and its overall goal. Without that knowledge, you won’t know if your risk management strategies are working or not, which means you’ll be trading without a safety net.

The time-based approach works similarly, but you set your stop loss at the same level regardless of how far down the price goes. The distinction here is that rather than going with the price, it stays in the same place and only gets triggered when your losing trade hits its threshold. Because this strategy doesn’t adapt to changing market conditions, you should only use it when trading a single coin in one timeframe.

As with all strategies used by experienced traders, this is just a recipe for success that helps prevent costly mistakes and lets you get the most out of every opportunity. Most importantly, though, it emphasizes the importance of having some overall strategy in place before you start trading. Without a plan, you’ll be like a ship drifting with the current, which means you won’t.

Position Sizing Digital Assets Risk Strategy.

If you want to trade cryptocurrency and not get burned, you should know a few things.

First, crypto trading is a risky business. The risk of loss when trading cryptocurrencies is much higher than stocks or forex because it’s an unregulated market that bad actors can manipulate easily (see Mt Gox). Secondly, if you’re going to trade in this space, make sure your risk tolerance matches up with your account size. And thirdly – one of the essential parts of crypto trading is position sizing. Position sizing refers to how much volume each transaction or trade will have, depending on your risk tolerance and account size.

Position sizes must be used wisely – if you put too much volume on a trade that’s not attached to an appropriate stop-loss level, then you’ll get burned. It is a widespread mistake cryptocurrency traders make. They often trade too big and fail to set sufficient stop losses. While it appears to be a minor error, it’s one that they make over and over again because they’re careless with their position sizing. Make sure you use stops responsibly, or else you’ll end up in the same lousy spot as these investors who lost thousands of dollars trading Bitcoin Cash the day before it forked .

Let’s review some recommendations from a member of The Affluence Network in regards to position sizing. He says that you should set your initial stop loss at 20% and make sure you have AT LEAST three times your trading capital in reserve. If you’re using leverage, then you should have five times your money in the stash. If you’re trading cryptocurrency with a large enough account size that allows it, consider using two to three times leverage. It is to give yourself some breathing room if the price of Bitcoin goes against you; this is common practice for those who trade only occasionally over long time horizons.

Many investors think position sizing is a complex strategy, and it’s not. In reality, all you have to do is make sure your total exposure to risk (combined with your speculative position) won’t cause you to go broke if the price of cryptocurrency moves against you by more than 10%. It means that if you’re aggressive with your investments, you must set smaller position sizes and vice versa. For example, you can choose to use 1-5% or 2-10% for your initial stops – it’s up to you. Just don’t trade beyond your means. For example, if you have $2,500 in your account and can only afford to lose $200 per trade (because of the other trading strategies you use), then don’t even bother trying to leverage unless you’re using at least a 1:2 margin.

Stop-loss cryptocurrency risk management strategy

Stop-loss is a type of order that assists in terminating lost transactions. It is a critical risk management tool since the investor can successfully handle transactions when the unexpected outcome. It is usually prudent to put a stop-loss order to avoid significant losses and minimize disaster danger.

Crypto traders need a stop-loss strategy. It is because crypto trading is risky and unpredictable. You never know the value of your investment until it’s too late to do anything about it. However, there are techniques to assist in managing this. Risk so that you can trade with confidence without fear of losing everything at any moment.

Stop Loss Order: It’s an order which helps cut down on the losses by not letting them get too high if things go wrong. It will also decrease the risk of ruin since you’ll be able to limit how much money you lose due to a bad decision or unforeseen event. If you are unsure of a coin’s direction, it will be best to set a stop loss. This way, you can avoid considerable losses and decrease the risk of ruin.

E.g., The currencies market goes down significantly, and your stop loss is at a -10% loss, but the coin continues to go downwards without stopping on your chosen exchange. You will, after that, get an email notifying you of the change. Of this situation, if it does occur. It will also show you exactly which coins have triggered your stop loss and how much they are worth in the present moment. You can then choose to leave the currency in your portfolio to continue trading or sell it.

Remember: The more you activate your stop loss, the less likely you will reach a profit in your trades. You’ll need to strike a balance that is comfortable for you. If this is something that you’re thinking of using regularly. Remember that this is a tool to help you manage your trades, not necessarily make them. Over time, you will get used to the different ways of trading and make fewer mistakes when making decisions while trading. With experience, this is something that you’ll be able to rely on more.

Short Squeeze bitcoin risk strategy

A short squeeze is when the traders are betting on a higher price, becoming entangled in the market’s whims. They need to buy back their assets at a much higher cost than what they bought them at (when they thought it was going down). It usually creates explosive movements on their way out because other participants would also be buying into these sudden spikes. Notice how 320% can be completed in a matter of four months. Many professional investors use this technique and focus their attention on finding possible short squeezes because they offer a high reward-to-risk ratio. However, having a solid risk management system is essential to compliment that strategy.

The method is pretty simple. You find an asset where the traders have been betting on lower prices. You wait for the price to break key resistance levels and confirm a bullish reversal pattern. After that, you look for better entry points with your initial stop loss.

The hard part is to find assets that have seen much short interest. Some traders use this tool which shows how much volume went through each exchange in the last hour, day or week. Just set the volume filter to ‘short,’ and other businesses will show up in red color so that you can easily spot any assets with high short interest.

It’s not a perfect method, but it can give you an idea.

I like to use coins where the 24h volume is above $2 million and, more importantly, has been growing in the last weeks. That way, I know that other traders might be interested in running the opposite strategy to mine (buying instead of selling).

Another method is to search for assets traded on new exchanges with a low trading volume. That means the investment might be promising, but it could also be that people aren’t aware of it yet and that its demand will explode when these traders start moving in. In that case, you’d have an advantage if you purchase during the early stages.

Also, you can use information from the last few weeks or months to identify possible patterns that can make your research easier by filtering and sorting coins by their daily volatility (up or down).

You will find assets with prominent upward trends that usually do not contain any news, but they offer excellent upside potential. You need to take into account that the risk is also higher.

I want to make the last point is the 24h volume of the asset you are using for your research. Generally, avoid coins with less than $500k in daily volume because there will not be enough liquidity, and other traders might not even notice any significant price movement.

Be very careful if you see large spikes and volume, as it might be a sign of manipulation. You never know what the people behind that are up to, so use that information with caution. You should always be aware that there is a risk before entering any trade, and don’t forget to take your profit when you have a chance (the longer you wait or think that something will go up further, the riskier it becomes).

Better to take small profits when available instead of waiting for huge ones and getting caught by surprise on the other side. If your strategy is a long-term one (6 months+), don’t forget to use limit orders so that you can set a target price for each trade.


The modern-day market is more volatile than ever, and it’s hard to keep up. That’s why trading has become so popular lately, as people are constantly looking for a way to make money in this economy. If you want to begin investing but are unsure where to begin, where, or how, our blog post can help get you started with the basics of cryptocurrency trading. You’ll learn about what crypto tokens are and which ones have been doing well recently (plus some tips on what kind of trader you might be). We also talk about risk management strategies that will allow you to take advantage of sudden price swings without going bankrupt- something we’ve seen happen too many times when traders don’t understand their risks before diving headfirst into the markets! Let’s get started.

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