Bitcoin Risk Calculator
Risk and Money Management in Bitcoin Trading
In any business, so as to make a profit one must learn how to manage risks. To make profits in trading bitcoin you need to learn about the various bitcoin money management strategies discussed on this learn trading bitcoin guide website.
When it comes to bitcoin online trading, the risks to be managed are potential losses. Using bitcoin risk management rules won't only protect your bitcoin account but also make you profitable in the long run.
What's Draw-Down in BTCUSD Trading?
As bitcoin traders the number one risk in trading bitcoin trading also known as draw down - this is the amount of money you have lost in your trading bitcoin account on a single bitcoin trade.
If you have $10,000 trading bitcoin capital and you make a loss in a single bitcoin trade of $500, then your trading bitcoin draw-down is $500 divided by $10,000 which is 5% trading bitcoin draw down.
What's Maximum Bitcoin Trading Draw Down?
This is the total amount of money you have lost in your trading bitcoin account before you start making profitable cryptocurrency trades. For example if you have $10,000 trading bitcoin capital & make 5 consecutive losing trading bitcoin trades with a total of $1,500 loss before making 10 winning cryptocurrency trades with a total of $4,000 profit. Then the trading bitcoin drawdown is $1,500 divided by $10,000, which is 15% maximum bitcoin draw down.
Bitcoin Draw Down is $442.82 (4.4%)
Maximum Bitcoin Draw Down is $1,499.39 (13.56 %)
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Risk and Money Management in BTCUSD Trading
The trading bitcoin example illustrated below shows the difference between risking a small percent of your trading bitcoin capital compared to risking a higher percent. Good Risk and Money Management in Bitcoin Trading principles requires you as a trader not to risk more than 2% of your total bitcoin trading account equity on any one single bitcoin trade.
Bitcoin Percent Risk Technique
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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.
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 87.50% of your bitcoin trading 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 account equity. This is why it is best to use the 2% risk management strategy in trading bitcoin.
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 account after 20 losing trades.
However, if you risked 10 % you would only have $32,805 in your bitcoin account after only 5 losing bitcoin trades that is less than what you would have in your cryptocurrency account if you risked only 2 % of your cryptocurrency trading account & lost all 20 trading bitcoin transactions.
The point is you want to setup your Risk and Money Management in Bitcoin Trading rules so that when you do have a loss making period, you will still have enough trading bitcoin capital to trade next time.
If you lost 87.50% of your trading bitcoin capital you would have to make 640 % profit to get back to break-even.
As compared to if you lost 32 % of your trading bitcoin capital you would have to make 47 % profit to get back to the break-even. To compare it with 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 break even if you were to lose a certain percentage of your trading bitcoin trading capital.
Concept of Break Even - Bitcoin Risk Calculation - Position Trading Risk Management
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At 50% trading bitcoin draw-down, one would have to earn 100 % on their invested trading bitcoin capital - a feat accomplished by less than 5% of all bitcoin traders worldwide - just to breakeven on a bitcoin account with a 50% loss.
At 80% trading bitcoin drawdown, one must quadruple their trading btcusd equity just to bring it back up to its original equity. This is what's known as to "breakeven" - which means - get back to your original bitcoin trading balance that you started with.
The more money you lose, the harder it's 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.
Bitcoin Money management is about only risking a small percent of your trading bitcoin capital in each bitcoin trade so that you can survive your losing streaks and avoid a big draw-down on your trading bitcoin account.
In bitcoin trading, traders use stop loss cryptocurrency orders which are put in order to minimize bitcoin losses. Controlling risks in trading bitcoin involves putting a trading stop loss bitcoin order after placing an new trading bitcoin order.
Effective Bitcoin Risk Management
Effective trading bitcoin risk management requires controlling all risks in trading bitcoin and a trader should come up with a money management trading bitcoin system & a money management trading bitcoin plan. To be in trading bitcoin or any other business you must make decisions involving some risk. All trading bitcoin factors should be interpreted to keep risk to a minimum & use the above bitcoin money management tips on this learn bitcoin lesson - Bitcoin Risk Calculation - Position Trading Risk Management.
Ask yourself? Some Bitcoin Trading Tips
1. Can the bitcoin risks to your trading bitcoin activities be identified, what forms do they take? & are these clearly understood and planned for in your written trading bitcoin plan? All the bitcoin risks should be taken care of in your trading bitcoin plan - written bitcoin plan.
2. Do you grade trading risks encountered by you when trading bitcoin in a structured way? - Do you have a money management strategy and a trading bitcoin plan? have you read about this learn trading bitcoin course which is well covered & discussed here on this learn trading bitcoin tutorial course for beginners.
3. Do you know maximum potential trading risk of each exposure for each trade which you place?
4. Are trading bitcoin decisions made on the basis of reliable and timely bitcoin market information & based on trading bitcoin strategy or not? Have you read about trading bitcoin systems on this learn trading bitcoin course.
5. Are the bitcoin risks big in relation to the trade turnover of your invested trading bitcoin capital & what impact could they have on your bitcoin profits margins & your bitcoin account margin requirements?
6. Over what time periods do the trading bitcoin risks of your trading bitcoin activities exist? - Do you hold bitcoin trades 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 about methods in which your trading bitcoin risks can be reduced or hedged & what it would cost in terms of profit if you did not include these measures to reduce potential loss, & what impact would it make to any up side of your bitcoin profit?
9. Have your bitcoin money management guidelines been adequately addressed, to ensure that you make & keep your trading bitcoin profits.
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