Position sizing means deciding how much of an asset to buy or sell for a trade. It is about how much capital I put at risk. For example, $ETH is currently trading at $2423.33. If I decide my stop loss would be the 7-day low of $2318, my risk per $ETH is about $105.33.
I aim to risk only a small percentage of my total capital on any single trade, often 1% or less. If I have $10,000 and decide to risk 1%, I can lose up to $100 on that trade.
This means I could buy about 0.95 $ETH ($100 / $105.33 per coin risk). The exact entry price for $ETH matters less than ensuring the potential loss from that trade, if it goes wrong, fits within my risk limit. A good entry means nothing if the trade size is too large for the stop loss. Focus on how much you can lose, not just how much you can make.
#PositionSizing #RiskManagement
I aim to risk only a small percentage of my total capital on any single trade, often 1% or less. If I have $10,000 and decide to risk 1%, I can lose up to $100 on that trade.
This means I could buy about 0.95 $ETH ($100 / $105.33 per coin risk). The exact entry price for $ETH matters less than ensuring the potential loss from that trade, if it goes wrong, fits within my risk limit. A good entry means nothing if the trade size is too large for the stop loss. Focus on how much you can lose, not just how much you can make.
#PositionSizing #RiskManagement