If you only risk money you’ve earned, does that mean your principal is safe?
“These two thousand are just profits. It’s fine if I lose it all.” It’s easy for that thought to suddenly throw off the scale of your next trade. The market doesn’t distinguish between a dollar from your paycheck and a dollar from your last winning trade. Once they’re in your account, they’re exposed to the same price fluctuations.
Say your account grows from $10,000 to $12,000, and then you’re willing to lose $2,000 on a trade. You might think your original principal is still intact, but relative to your current equity, you’re allowing a loss of about 16.7%. This is an arithmetic example, not a demonstration of real trading returns.
CME’s risk management course discusses the risk of an individual trade as a proportion of account equity, and makes clear that the example percentages can be adjusted. The point is to decide in advance how much you’re willing to risk—not to treat any one percentage as a universal answer. And setting a stop-loss doesn’t guarantee that your order will execute at the specified price.
Gradually increasing trade size after profits, according to rules you set in advance, is different from suddenly loosening your loss limit because “it’s just money I’ve made.” The first approach can be reviewed; the second often carries the excitement of the last trade into the next position.
For every trade I plan in BTC, ETH, and SOL, I convert the potential loss into a percentage of my current account equity. What I need to explain is why this opportunity is worth taking this amount of risk—not where the money originally came from. Profits that stay in your account are what truly change it.
$BTC $ETH $SOL #RiskManagement
Tap my profile picture to view live trades
“These two thousand are just profits. It’s fine if I lose it all.” It’s easy for that thought to suddenly throw off the scale of your next trade. The market doesn’t distinguish between a dollar from your paycheck and a dollar from your last winning trade. Once they’re in your account, they’re exposed to the same price fluctuations.
Say your account grows from $10,000 to $12,000, and then you’re willing to lose $2,000 on a trade. You might think your original principal is still intact, but relative to your current equity, you’re allowing a loss of about 16.7%. This is an arithmetic example, not a demonstration of real trading returns.
CME’s risk management course discusses the risk of an individual trade as a proportion of account equity, and makes clear that the example percentages can be adjusted. The point is to decide in advance how much you’re willing to risk—not to treat any one percentage as a universal answer. And setting a stop-loss doesn’t guarantee that your order will execute at the specified price.
Gradually increasing trade size after profits, according to rules you set in advance, is different from suddenly loosening your loss limit because “it’s just money I’ve made.” The first approach can be reviewed; the second often carries the excitement of the last trade into the next position.
For every trade I plan in BTC, ETH, and SOL, I convert the potential loss into a percentage of my current account equity. What I need to explain is why this opportunity is worth taking this amount of risk—not where the money originally came from. Profits that stay in your account are what truly change it.
$BTC $ETH $SOL #RiskManagement
Tap my profile picture to view live trades
