Bitcoin Risk Management Strategies for Serious Traders in Bitcoin Trading
Proper Bitcoin Risk Management Bitcoin Trading Risk Management Bitcoin PDF
In any business, so as to make profit one must learn how to manage risks. To make profits in bitcoin trading you need to learn about the various bitcoin risk management strategies discussed on this best learn bitcoin trading tutorial web-site.
When it comes to bitcoin online trading, the risks to be managed are potential losses. Using bitcoin risk management rules will not only protect your btcusd trading trade account but also make you profitable in long run.
What's Draw Down in BTCUSD Trading?
As bitcoin traders the number one risk in bitcoin trading is referred to as draw down - this is the amount of money you have lost in your bitcoin trade account on a single bitcoin trade transaction.
If you have $10,000 bitcoin trade capital & you make a loss in a single bitcoin trade of $500, then your bitcoin draw down is $500 divided by $10,000 which is 5% bitcoin trading draw down.
What's Maximum Bitcoin Trading Draw Down?
This is the total amount of money you have lost in your bitcoin trade account before you begin making profitable cryptocurrency trades. For examples if you have $10,000 bitcoin trade capital & make 5 consecutive losing bitcoin trades with a total of $1,500 loss before making 10 winning cryptocurrency trades with a total of $4,000 profit. Then the bitcoin trading maximum draw-down is $1,500 divided by $10,000, which is 15% maximum bitcoin draw down.
Bitcoin Draw Down is $442.82 (4.40%)
Maximum Bitcoin Draw Down is $1,499.39 (13.56 %)
To learn how to generate the above bitcoin trading reports using MT4 bitcoin platform: Generate Bitcoin Trading Reports on MT4 Tutorial - Crypto Risk Management in Crypto Trading - Risk Management Rules in Bitcoin Trading
Bitcoin Draw Down and Risk Management in Trading Bitcoin Market
The cryptocurrency trading example illustrated below shows the difference between risking a small percent of your bitcoin capital compared to risking a higher percent. Good Bitcoin Draw Down and Risk Management in Trading Cryptocurrency Market principles requires you as a trader not to risk more than 2% of your total bitcoin trade account equity on any one single bitcoin trade transaction.
Bitcoin Percent Risk Technique
2% & 10% Bitcoin Trading Risk Management Rule - Bitcoin Draw Down and Risk Management in Trading Bitcoin Market
There is a big difference between risking 2% of your bitcoin account equity compared to risking 10% of your equity on a single bitcoin trade transaction.
If you happened to go through a losing bitcoin streak & lost only 20 cryptocurrency trades in a row, you would have gone from beginning bitcoin account balance of $50,000 to having only $6,750 left in your cryptocurrency account if you risked 10% on each bitcoin trade. You would have lost over 87.5% of your bitcoin trade account equity.
However, if you risked only 2 % you would have still had $34,055 in your bitcoin account which is only a 32 % loss of your total bitcoin trading account equity. This is why it's best to use the 2% bitcoin risk management strategy in cryptocurrency trading.
Difference between risking 2 % & 10 % on a single bitcoin trade is that if you risked 2 % you would still have $34,055 in your bitcoin trading account after 20 losing trades.
However, if you risked 10 % you would only have $32,805 in your bitcoin trading account after only 5 losing bitcoin trades that's less than what you would have in your cryptocurrency account if you risked only 2% of your cryptocurrency trading account and lost all 20 btcusd trade transactions.
The point is you want to setup your Bitcoin Draw Down and Risk Management in Trading Cryptocurrency Market rules so that when you do have a loss making period, you'll still have enough bitcoin trade capital to trade next time.
If you lost 87.5% of your bitcoin trade capital you would have to make 640% profit to get back to breakeven.
As compared to if you lost 32 % of your bitcoin trade capital you would have to make 47% profit to get back to the breakeven. To compare it with the bitcoin examples 47 % is much easier to break-even than 640 % is.
The trading chart below shows what percentage you would have to make so that you get back to breakeven if you were to lose a certain percentage of your bitcoin trade capital.
Concept of Break Even - Bitcoin Risk Management in Trading Tutorial
Cryptocurrency Account Equity & Break Even - Bitcoin Risk Management Strategies for Serious Traders in Bitcoin Trading - Bitcoin Risk Management in Trading Tutorial
At 50% bitcoin drawdown, one would have to earn 100 % on their invested bitcoin trade capital - a feat accomplished by less than 5% of all bitcoin traders worldwide - just to break-even on a bitcoin account with a 50% loss.
At 80% crypto draw down, one must quadruple their bitcoin trading equity just to bring it back to its original equity. This is what's referred to as to "break-even" - which means - get back to your original bitcoin trade account balance that you started with.
The more money you lose, the harder it is to make it back to your original bitcoin trading account size.
This is why as a trader you should do everything you can to PROTECT your bitcoin trading account equity. Do not accept to lose more than 2% of your bitcoin account equity on any 1 single bitcoin trade transaction.
Bitcoin Money management is about only risking a small percent of your bitcoin trade capital in each bitcoin trade so that you can survive your losing streaks and avoid a big draw down on your bitcoin trade account.
In bitcoin trading, traders use stop loss cryptocurrency orders which are put in order to minimize bitcoin losses. Controlling risks in bitcoin trading involves putting a crypto stop loss bitcoin order after placing an new bitcoin trade order.
Effective BTCUSD Risk Management
Effective bitcoin trading risk management requires controlling all risks in cryptocurrency trading & a trader should create a risk management bitcoin system and a risk management bitcoin trading plan. To be in bitcoin trading or any other business you must make decisions involving some risk. All bitcoin trading factors should be interpreted to keep risk to a minimum & use the above bitcoin risk management tips on this learn bitcoin lesson - Bitcoin Risk Management in Trading Tutorial.
Ask yourself? Some Bitcoin Trading Tips
1. Can the bitcoin risks to your bitcoin trading activities be identified, what forms do they take? & are these clearly understood and planned for in your bitcoin trading plan? All the bitcoin risks should be taken care of in your bitcoin trading plan.
2. Do you grade the trading risks encountered by you when bitcoin trading in a structured way? - Do you've a risk management strategy & a bitcoin trading plan? have you read about this learn bitcoin trading tutorial which is well covered & discussed here on this learn bitcoin trading web site for beginners.
3. Do you know maximum potential trading risk of each exposure for each trade which you place?
4. Are trading decisions made on the basis of reliable & timely bitcoin market information and based on bitcoin trading strategy or not? Have you read about bitcoin systems on this learn bitcoin web site.
5. Are the bitcoin risks big in relation to the trade turnover of your invested bitcoin trade capital & what impact could they have on your bitcoin profits margins & your bitcoin account margin requirements?
6. Over what trading time periods do the bitcoin trading risks of your bitcoin trading activities exist? - Do you hold bitcoin trade positions long-term or short-term? what type of bitcoin trader are you?
7. Are the exposures in trading a one off or they are recurring?
8. Do you know enough about methods in which your bitcoin trading risks can be reduced or hedged & what it would cost in terms of profit if you did not include these stipulated measures to reduce potential loss, & what impact would it make to any up side of your bitcoin profit?
9. Have your bitcoin risk management rules been adequately addressed, to ensure that you make and keep your bitcoin trading profits.
Bitcoin Risk Management Strategies for Serious Traders in Bitcoin Trading - Bitcoin Risk Management in Bitcoin Trading - Risk Management Rules in Bitcoin Trading
