Bitcoin Money Management Strategies Methods
How to Calculate Risk Management Bitcoin Crypto
In any business, in order to make a bitcoin profit one must learn how to manage risks. To make bitcoin profits in trading bitcoin you need to learn about the various bitcoin money management strategies discussed on this learn trading bitcoin tutorial web site.
When it comes to bitcoin trading, the risks to be managed are potential bitcoin 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 Bitcoin Trading?
As bitcoin traders the number one risk in 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 example if you have $10,000 in 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 trading bitcoin reports using MT4 bitcoin platform: Generate Bitcoin Trading Reports on MT4 Tutorial - Bitcoin Trading Money Management System Tutorial - Bitcoin Risk Management Excel Spreadsheet
How to Calculate Risk Management Bitcoin Crypto
The in trading bitcoin example illustrated below shows the difference between risking a small percent of your bitcoin trading capital compared to risking a higher percent. Good How to Calculate Risk Management Bitcoin 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 Money Management Rule - How to Calculate Risk Management Cryptocurrency - Importance of Risk Management in 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 trading account which is only a 32 % bitcoin 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 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 How to Calculate Risk Management Bitcoin rules so that when you do have a bitcoin loss making period, you will still have enough in trading bitcoin capital to trade next time.
If you lost 87.5% of your in trading bitcoin capital you would have to make 640% bitcoin profit to get back to breakeven.
As compared to if you lost 32 % of your in trading bitcoin capital you would have to make 47% bitcoin 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 trading bitcoin trading capital.
Concept of Break Even - Bitcoin Trading Money Management System Lesson
Cryptocurrency Account Equity & Break Even - Crypto Money Management Methods - Bitcoin Trading Money Management System Lesson
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% bitcoin 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 trading bitcoin, traders use bitcoin stop bitcoin loss orders which are put in order to minimize bitcoin losses. Controlling risks in trading bitcoin involves putting a bitcoin trading stop bitcoin loss order after placing an new bitcoin trade order.
Effective Bitcoin Risk Management
Effective in trading bitcoin risk management requires controlling all risks in trading bitcoin and a trader should create a money management bitcoin system and a money management in trading bitcoin plan. To be in trading bitcoin or any other business you must make decisions involving some risk. All in trading bitcoin factors should be analyzed to keep risk to a minimum & use the above bitcoin money management tips on this article - Bitcoin Money Management System Tutorial.
Ask yourself? Some Bitcoin Trading Tips
1. Can the bitcoin risks to your in trading bitcoin activities be identified, what forms do they take? and are these clearly understood and planned for in your in bitcoin trading plan? All the bitcoin risks should be taken care of in your in trading bitcoin plan.
2. Do you grade the trading risks encountered by you when in trading bitcoin in a structured way? - Do you have a money management bitcoin strategy and a in trading bitcoin plan? have you read about this learn in trading bitcoin topic which is well covered explained here on this learn bitcoin trading 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 a in trading bitcoin strategy or not? Have you read about in bitcoin 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 trading bitcoin risks of your in trading bitcoin activities exist? - Do you hold in trading 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 about techniques in which trading bitcoin risks can be reduced or hedged & what it would cost in terms of bitcoin profit if you did not include these measures to reduce potential bitcoin 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 and keep your in trading bitcoin profits.
Trading Bitcoin Risk Management & Bitcoin Money Management Methods - DrawDown Bitcoin Risk Management Chart - DrawDown Bitcoin Trading Risk Management Calculation
