Day Trading Bitcoin Risk Management & Cryptocurrency Money Management Strategies
BTCUSD Trade Management Strategies for Day Trading Bitcoin
In any business, so as to make a profit a trader must learn how to manage risks. To make profits in day trading bitcoin you need to learn about the various bitcoin money management strategies discussed on this learn day trading bitcoin tutorial web site.
When it comes to bitcoin day trading, the risks to be managed are potential losses. Using bitcoin risk management rules will not only protect your bitcoin account but also make you profitable in long run.
What's DrawDown in BTCUSD Trading?
As bitcoin traders the number one risk in day trading bitcoin trading is referred to as draw down - this is the amount of money you have lost in your cryptocurrency trading account on a single bitcoin trade transaction.
If you have $10,000 bitcoin capital & you make a bitcoin loss in a single bitcoin trade of $500, then your bitcoin draw-down is $500 divided by $10,000 which is 5% bitcoin draw down.
What's Maximum BTCUSD 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 in day trading bitcoin capital & make 5 consecutive losing bitcoin trade positions with a total of $1,500 bitcoin loss before making 10 winning cryptocurrency trades with a total of $4,000 bitcoin profit. Then the bitcoin drawdown 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 in day trading bitcoin reports using MT4 bitcoin platform: Generate Bitcoin Trading Reports on MT4 Tutorial - Draw Down Bitcoin Risk Management Calculator
Day Trading Bitcoin Risk Management Strategies
The in day trading bitcoin example illustrated below shows the difference between risking a small percent of your bitcoin capital compared to risking a higher percentage. Good Day Trading Bitcoin Risk Management Strategies principles requires you as a trader not to risk more than 2% of your total bitcoin account equity on any one single bitcoin trade transaction.
Bitcoin Percent Risk Technique
2% & 10% Bitcoin Trading Money Management Rule - Day Trading Bitcoin Risk Management Strategies - Bitcoin Trade Management Strategies for Day Trading Bitcoin
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 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 day 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 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 Day Trading Bitcoin Risk Management Strategies rules so that when you do have a loss making period, you will still have enough in day trading bitcoin capital to trade next time.
If you lost 87.50% of your in day trading bitcoin capital you would have to make 640% profit to get back to breakeven.
As compared to if you lost 32 % of your in day trading bitcoin 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 in day trading bitcoin trading capital.
Concept of Break Even - DrawDown Bitcoin Risk Management Chart
Cryptocurrency Account Equity & Break Even - Day Trading Bitcoin Risk Management & Cryptocurrency Money Management Strategies Methods - Draw Down Bitcoin Risk Management Chart
At 50% bitcoin drawdown, one would have to earn 100 % on their invested bitcoin 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% bitcoin 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 trading 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 capital in each bitcoin trade so that you can survive your losing streaks and avoid a big draw down on your cryptocurrency trading account.
In day trading bitcoin, traders use stop loss cryptocurrency orders which are put in order to minimize bitcoin losses. Controlling risks in day trading bitcoin involves putting a crypto stop loss bitcoin order after placing an new bitcoin trade order.
Effective BTCUSD Risk Management
Effective in day trading bitcoin risk management requires controlling all the risks in day trading bitcoin and a trader should create a money management bitcoin system and a money management in day trading bitcoin plan. To be in day trading bitcoin or any other business you must make decisions involving some risk. All in day trading bitcoin factors should be analyzed to keep risk to a minimum & use the above bitcoin money management tips on this article - DrawDown Bitcoin Risk Management Chart.
Ask yourself? Some Bitcoin Trading Tips
1. Can the bitcoin risks to your in day trading bitcoin activities be identified, what forms do they take? and are these clearly understood and planned for in your in day trading bitcoin plan? All the bitcoin risks should be taken care of in your in day trading bitcoin plan.
2. Do you grade the trading risks encountered by you when in day trading bitcoin in a structured way? - Do you've a money management strategy & a day trading bitcoin plan? have you read about this learn in day trading bitcoin topic which is well covered explained here on this learn day trading bitcoin website for beginner cryptocurrency traders.
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 day trading bitcoin strategy or not? Have you read about in day trading bitcoin day systems on this learn bitcoin web site.
5. Are the bitcoin risks big in relation to the trade turnover of your invested bitcoin capital & what impact could they have on your bitcoin profits margins & your bitcoin account margin requirements?
6. Over what trading time periods do the in day trading bitcoin risks of your in day trading bitcoin activities exist? - Do you hold in day trading bitcoin trade positions long-term or short-term? what type of bitcoin day 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 day 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 day money management guidelines been adequately addressed, to ensure that you make and keep your in day trading bitcoin profits.
Day Trading Bitcoin Risk Management & Cryptocurrency Day Money Management Methods - DrawDown Cryptocurrency Day Risk Management Chart - DrawDown Cryptocurrency Day Trading Risk Management Calculation
