Trade Bitcoin Trading

Methods and Styles for Managing Equity in BTCUSD Trading

Effective equity management in BTC/USD trading involves ensuring that losses are kept smaller than the profits earned. This practice, known as maintaining a favorable risk-to-reward ratio, is key to success.

High Risk: Reward Ratio

This risk: reward ratio method is used to increase the profitability of an investment strategy by trading only when you have the potential to make more than 3 times what you're risking when opening a Bitcoin trade.

If you invest using a high risk : reward ratio of 3:1 or more, you significantly/greatly increase your chances of becoming profitable in the long run when trading Bitcoin bitcoin online trading. The chart below indicates to you how this market concept works:

Money management decides Bitcoin trade success. This example shows rules and methods.

In the initial illustrations, you can notice that even if you solely succeeded in 50 percent of your BTCUSD trade positions, you would still realize a gain of $10,000. Even if your success rate dropped lower to around 30% you would nevertheless end up gaining as depicted in the second illustration exhibited above.

Just remember that whenever you've got a good risk: reward ratio, your chances of being profitable are much greater even if your system has got a lower win percentage.

This shows a support zone where sellers push down each time. They lower it bit by bit. Once it breaks, gold price keeps falling.

Because to recover $1,000, you must win 10 times if you lose just 1 Bitcoin trade.

A single loss necessitates the return of all profits garnered from the preceding ten successful trade transactions.

This type of investment strategy makes no sense and you will lose in the long term, guaranteed!

Percentage Risk Method

The percentage risk method involves risking a fixed percentage of your equity per trade, providing a consistent and disciplined approach to risk management.

Percent risk based method specifies that there will be a certain percentage of your equity balance that is at risk per position. To calculate the % per every trade transaction, you need to know 2 things, the percentage risk that you've chosen and lot size of an open trade order so as to calculate where to put the stop loss order. Since the % is known, we shall use it to calculate the lot size of the order to be placed in the Market: this is known and referred to as position size.

Example

Assuming your trading account holds a balance of $50,000 and you adhere to a 2% risk parameter.

Then 2 % is equal to $1,000

If three investors purchase Bitcoin, with the first employing a stop loss of 20,000 points, the second using a stop loss of 40,000 points, and the third utilizing a stop loss of 50,000 points, their respective trading position sizes will be:

Example 1:

Stoploss = 20,000 points

Risk % = 2 percent = $1,000 dollars

Determining the Required Number of Bitcoin Contracts to Initiate Based on Lot Size, Given the Conversion Rate: 20,000 Points = $1,000

1 Point of BTCUSD Crypto movement = $0.001

1,000 Points BTCUSD movement = $1

20,000 Points Bitcoin movement = $20

$1,000 stop loss divided by $20 = 50 Bitcoins (50 bitcoin contracts)

Position size = 50 bitcoin contracts

Position size is 50 Bitcoins (for 50 Bitcoin lots 1 point movement =$ 0.05) ($0.05x20,000=$1,000)

Stoploss = 20,000 points

In simplified terms: If your designated risk tolerance is set at 2%, equating to $1,000, and your chosen stop loss level is $20, you would then open 50 bitcoin lots - where 50 bitcoins multiplied by a $20 per unit stop loss equals the total $1,000 risk exposure.

Example 2:

Stoploss = 40,000 points

Risk % = 2 percent = $1,000 dollars

Calculation for the Number of Bitcoin Contracts to Open Based on Lot Size, Using the Conversion Rate: 40,000 Points = $1,000

1 Point of BTC/USD Crypto Currency movement = $0.001

1,000 Points BTCUSD movement = $1

40,000 Points Bitcoin movement = $40

$1,000 stop loss divided by $40 = 25 Bitcoins (25 bitcoin contracts)

Position size = 25 bitcoin contracts

The position size equates to 25 Bitcoins (for 25 Bitcoin lots, one point movement equals roughly $0.0025) resulting in ($0.025 multiplied by 40,000 results in $1,000).

Stoploss = 40,000 points

If your risk is 2% or $1,000 and your stop-loss level is set at $40, you will open 25 Bitcoin lots because 25 Bitcoins multiplied by a $40 stop equals a total stop loss of $1,000.

Example 2:

Stop loss = 50,000 points

Risk % = two % = $1,000

How many Bitcoin contracts to open based on How many lots to open where 50,000 points = $1,000

1 Point of Bitcoin movement = $0.001 dollars

1,000 Points Bitcoin movement = $1

50,000 Points Bitcoin movement = $50

$1,000 stop loss divided by $50 = 20 Bitcoins (20 bitcoin contracts)

Position size = 20 bitcoin contracts

Position size is 20 Bitcoins (for 20 Bitcoin lots 1 point movement =$ 0.0020) ($0.020x50,000=$1,000)

Stop loss = 50,000 points

In simple terms, if you risk 2% of your account, or $1,000, and set a $50 stop loss, you can trade 20 bitcoin lots. That means 20 bitcoins times $50 equals a $1,000 stop loss.

Example: If a btc usd trader holds $50,000 and wishes to determine the annual income from their trading strategy.

Annual income: If your plan wins 70% of the time and your risk reward is 3:1, and your stop loss is 20,000 points and take profit is 60,000 points and you make 100 trades each month trading standard lots, then your highest yearly income will be around:

For 1 standard BTCUSD lot profit per 1 point is $0.001

100 transactions*12 months = 1,200 transactions

Wins and Profit

70 % win: 70% of 1,200 = 840 profitable trade transactions

840 transactions * 60000 points = 50,400,000 points

50,400,000 points = $50,400

Losses

30 % losses: 30 % of 1200 = 360 losing transactions

360 transactions * 20000 points = 7,200,000 points

7,200,000 points = $7,200

Net Profit = $50,400 - $7,200 = $43,200

Income: $43,200

The illustration above demonstrates an example of potential returns based on your trading system's risk-to-reward ratio and its overall win percentage.

Other factors & aspects to consider include:

Max Number of Open Position - A final point to consider is the max number of open positions - that is the max number of trades that you as a trader want to be in at any one time. This is another factor/aspect to decide when managing your account equity.

Suppose you pick a 2% risk rule per trade. You might limit yourself to five open trades at once, each risking 2%. If three lose on the same day, your equity drops 6% that day.

Now suppose two trades win. With a 3:1 risk-reward ratio, they yield 12%. Risk 2% per trade for a 6% gain each. Two at 6% add to 12%.

Consequently, a 12% daily gain minus a 6% daily loss results in a net positive return of 6% for that day.

Understanding money management guidelines is crucial for traders, including knowing risk-reward ratios and calculating stop-loss levels based on the bitcoin lot sizes per trade.

Invest with enough money. One big error for Bitcoin traders is starting with too little capital.

An investor with limited capital tends to be overly cautious, frequently setting loss cut points beyond sensible trading limits, which often results in premature exits from positions before any potential success from their strategy can be realized.

Practice Discipline: Mastery over discipline represents the most critical element for a trader seeking consistent financial success while trading Bitcoin online. Discipline embodies your capacity to formulate a trading strategy and adhere strictly to executing that plan when engaging in online Bitcoin trading.

It means you can let a Bitcoin trade grow over time without quickly pulling out of the market just because you feel nervous about risk. Also, discipline means you can keep following your plan even when you have lost money. Try your best to stick to your plan's rules and build the discipline you need to make money when trading Bitcoin online.

Managing Trade Account Capital Basics

Money management is the foundation of any Bitcoin strategy as it helps investors to get profit when transacting in the online Bitcoin market. It is especially important when transacting in the leveraged online Bitcoin bitcoin market.

If you want to invest successfully in the BTCUSD market, know that it's very important to have a good money management plan because you'll be using leverage when you place your orders online.

The difference between average profits and losses should be sharply measured, the profit on average should be higher than the losses on average, otherwise trading Bitcoin will not bring any profits. In this case, a trader has to formulate their own trading rules: the success of each person depends on their individual characteristics. Thus, each trader makes his own plan and by the above rules sets up money management guidelines.

When you're making BTCUSD orders, set your stop losses to avoid losing a lot of money: stoploss orders can also be used to protect your earnings.

Consider the chance of getting profit against making loss as 3:1 - this risk to reward ratio should be more favorable on the profit side. Considering these rules and guidelines, you can use them to improve profitability of your strategy and try to come up with your own strategy that will possibly give you good profits.

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