How to implement a relationship risked in trading: a guide to cover and management
The world of cryptocurrency trade is rapid and constantly evolving. With the rise of new coins and tokens, it has become increasingly important for traders effectively manage risks. A key strategy used by expert traders is the implementation of a risk compensation relationship, also known as “stop loss” approach or “risk management”. In this article, we will explore how to implement a relationship risked in trading and provide consultancy on coverage and risk management.
What is a risk of reversal relationship?
A risk compensation relationship, also known as the loss of stop, is a mathematical formula used to determine the quantity of profit or the loss that an merchant can afford before retiring from a profession. It is calculated by dividing the potential reward for the maximum quantity that can be lost.
For example, if you exchange a pair of bitcoins with a risk of completion of the risk of 2: 1, this means that for each $ 100 in potential profit, it is necessary to risk only $ 20 ($ 100/2).
How to implement an inverted risk relationship
To implement a relationship risked in the trading strategy, follow these steps:
- Define your trading objectives : before implementing a risk reward relationship, define what you want to achieve in every profession. Are you looking for short -term earnings or long -term benefits? Are you trying to maximize your returns or minimize losses?
- Choose risk levels : decide the maximum amount that can be risky for businesses. This is generally calculated using a formula such as:
Risk = reward / (1 + percentage of arrest)
When the risk is the maximum quantity that can be lost and the percentage of loss of arrest is the percentage of potential reward that will be used to calculate the loss of arrest.
- Define your trading plan : Create a trading plan that describes your risk ratio, as well as any other key element such as the sizing of the location, the profit objectives and the arrest levels.
- Monitor your operations : Continuously monitor your professions to make sure to follow the planned strategy.
Types of risk recovery relationships
There are different types of risk reversal relationships that traders use in cryptocurrency trading:
* 2: 1 ratio: this is the most common risk reverse reversing ratio, in which for each $ 100 of potential profit, only $ 20 can be lost.
* 3: 1 or 4: 1 ratio : these higher risk compensation relationships are often used for long -term transactions or when trying to maximize returns.
* Percentage of the loss of arrest (SL%)
: this is the percentage of potential reward that will be used to calculate the loss of arrest. SL% common values include:
* 20-50%
* 30-60%
* 40-70%
Consulting to manage the risk
In addition to implementing a risky relationship, there are many other tips for risk management:
* Position sizing : avoid taking too many risks for exchange by fixing a position size based on overall risk tolerance and trading objectives.
* Arrest levels : regulates the clear arrest levels that will be used to limit potential losses in each profession.
* Risk management tools : take into consideration the use of risks management tools such as arrest indicators, stops or roofing strategies to help manage risks.
Conclusion
The implementation of a risk reversal relationship is an essential step to manage the risk and maximize the yields of cryptocurrency trading. By following these steps and advice, you can create a solid base for your strategy and prepare for success. Do not forget to remain disciplined, carefully monitor your activities and adjust your strategy if necessary to make sure you get the best party of your risks.
Clause not responsibility
This article is only for information purposes and must not be considered an investment advice. Cryptocurrency trading has significant risks, including capital loss, and cannot satisfy all investors.