Since I myself trade in a public manner on #Binance Square, I often get asked a question: How to place a stop loss. When a trader begins to have the awareness of stopping losses, he is already halfway to making a good transaction.
This long article is not about discussing actual stop loss percentages, but about what is proper risk management awareness and bad trading behavior.
Topic: How to successfully complete cryptocurrency transactions while properly managing risk #BTC
01丨Slow water can easily lead to a winner💰
If you know a little bit about K-line and technical analysis skills, you should be able to understand the fact that most of the time the probability of rise or fall is not 1:1, so many times some people like to use coin toss as an analogy to actual trading, which is not Wrong, but not quite right either.
How to understand this sentence: Take the example of buying low and selling high. There will always be some subjective and objective highs and lows in the market. If you buy at those high points in hindsight, the probability that the market will continue to rise is definitely less than 50% based on the subjective + objective combination.
Although it is said that the market is full of uncertainty, the trading system is to frame an objective determination within an uncertain environment. For example, sometimes in a relatively low market environment, combined with objective factors such as volume, the probability of buying an increase is objectively greater than 50%.
Even if you have never understood technical analysis, you should understand one thing: trading results are a game determined by probability.
There are three probabilities: winning rate, odds and frequency
After knowing these three "rates", the next step is a simple arithmetic problem. However, the contract leverage we often use actually magnifies the "odds" proportionally. Therefore, we need to work hard on the winning rate and odds.
Simply put: you cannot maintain high leverage contract trading while ensuring high frequency and accuracy.
The larger your leverage, the more you need to pursue the correct direction or reduce the frequency of fixed transactions over a period of time.
In other words, no matter how big or small your odds are, it is difficult for you to get a satisfactory return through a very small number of transactions, and high leverage does not mean a shortcut. In terms of principal, a steady stream of profits is the core of trading. Whether your leverage is 5 times or 100 times, the setting of the three-rate combination is like an impossible triangle that defines this boundary.
02丨The game between cost price and total position ⚔️
Whether it is short-term trading or long-term investment, we will more or less have the experience of being "trapped", which involves the question of whether you should increase your position against the trend.
I am doing both long and short-term operations, and I am also doing the cost-raising thing, but I will frame a line and boundary for the cost-raising
What is the line? You should add positions when the price drops by a certain percentage, with a fixed ratio, instead of adding positions when you feel the price has dropped enough. This vague boundary will result in the cost price still being high enough in the end.
What is a boundary? It refers to the total amount of funds in a token. I have seen people increase their positions in a token, even taking out loans to increase their positions, just to get a low enough cost price, but ended up increasing their positions until the token was delisted...
I made a simple cross-coordinate chart to help you understand the fixed ratio of adding positions more intuitively. In addition to reserving a budget for adding positions to a stock, you should also avoid falling into the unwillingness of adding positions all the time.
This is the only solution to avoid being stuck from shallow to deep.
Firmly implementing these two points in the market can make it easier to survive in the long run. Finally, let me tell you an interesting story: Am I here to trade in the cryptocurrency world just to protect my capital? I’m here to make money!
This is a rough statement, but it is true. However, it does not mean that you can get stable and fast results by magnifying the risk! When the big waves retreat, you are still at the table, and you are the winner!