Topic: Cleo.finance: How to avoid crippling losses when trading? - page 2. (Read 830 times)

Making losses is fine, not letting them get to us is the real treasure in the trash. If we could keep our heads high and keep on doing something that is profitable for the future, then we will be fine. Those losses should become our school books, we should be able to learn from them so well that in the future when we are about to make a mistake, we should remember the mistakes we did in the past and avoid doing them again.

This isn't hard, sometimes you make the same mistake two or three times or even maybe more before you learn to avoid them. But as long as you learn, and you do not make it again, they are still our lessons and they are valuable.

mistakes in the past being the best teacher, an experience that should really make us able to avoid the same problem. It takes several tries to avoid the same problem, every trader has their own strategy, but what is certain is that avoiding losses is something that must be done. We also have to have control over the trades that are being made, lest the traders only get losses.

In my opinion, Setting a Stop Loss is one of the important elements moreover done by daily traders. This is done to avoid more losses and move to another trading pair again to gain more profits. So, the recent profits can cover the loss that we have in advance. But, if this is for long-term investment, especially for top coins like Bitcoin, we may not need to set a stop loss because we are not in immediate trades.

Will this really work on every trading strategy?

When I see the trading leverage use, well, this may be interesting more, because we can gain much more profits on it, but also high risks to face. That is why more calculations, strategies, and smart decisions to take the position will be very crucial to combine.

That type of struck and "do not get out of your way for no reason" mindset is not an easy one, of course it is not impossible but it is not an easy one neither, that takes a while for most people and we should not be hoping for something like that anytime soon neither.

I believe that the best thing we could do is learning how to make mistakes, and learning why we made those mistakes and then trying to make those mistakes again. I know that it is not going to be a simple thing to just go out and make mistakes because it is our money we are talking about if we lose, but without that, we are going to just try to profit and involuntarily make mistakes which will be much worse.

People especially newbie ignore this stuff. Their goal is to have huge profit so they often tend to risk a huge percentage of their portfolio. They don't think about any risk and just think of the outcome if the market favors their side. They will just realize their mistake when their portfolio is more than 50% down.

Learning those strategies requires strong discipline to control their emotion which is the most important for me to avoid huge loss in trading. Even experts sometimes forget their trading strategy because of greed.

Hello everybody, here is an article about position sizing, and here is its quick summary(Full Article):

Position sizing is determining the correct size of the position based on the amount of money you risk on the particular trade.

Before you can do that, you need to figure out what is the maximum acceptable risk of the trade.

That risk is usually expressed as a % of your balance, that you are willing to lose.

To make sure you don’t lose more than this amount traders set a Stop Loss order which are the real maximum exposure of your position.

If you don’t use a stop loss, you are exposing your entire portfolio!


Where to put a stop loss?

• That’s where Technical Analysis can be handy. Majority of retail traders would look at the chart to find out – usually behind some support/resistance level or based on some volatility indicator, such as ATR

Rule of thumb:

Risk between 1-3% of your portfolio balance on each position. This way any single individual loss won’t wipe your account and break your spirit. And more importantly, even a string of losses will leave you with enough ammunition to recoup the losses.

Have a clear approach to risk:

• Set a risk limit for each trade, asset in general, day, week and month (you won’t risk more than X account)
• Determine the right position size and start small
• Increase the position size of trades slowly if your account grows
• Lower size or switch back to paper trading if your account doesn’t

Two types of position sizing methods: Fixed and flexible

Fixed position size

• Using the same position size for every trade
• Good for finding out if your strategy has an edge
• Make sure you come back and reevaluate position size periodically.

Flexible position size

• Using a percentage of current balance
• Cluster of wins makes every following win larger
• Cluster of losses makes every following loss smaller

How to calculate the correct position size:


You need to know

• Trading account size
• Acceptable risk (in % per each trade)
• Invalidation point (in form of a distance from the open price)

The formula:

Position size = Trading account size x Acceptable risk / Invalidation

Example:

• Trading account size = $10,000
• Acceptable risk = 1%
• Invalidation point = 4% drop in market price

Position size = $10,000 * 0,01 / 0,04 = $2,500

This way you will always risk losing $100 no matter where your Stop Loss goes! If Stop Loss must be wider, say 8%, the calculation is:

Position size = $10,000 * 0,01 / 0,08 = $1,250

Doubling the distance to our stop loss has us reducing our position size by half to maintain the same possible loss.

How to set position size in the trading platform

• Pick a leverage
• Add a Stop Loss
• Input the market price or the distance in % of the stop loss
  
  • Whichever value you enter first, that becomes the constant – element that won’t change when you edit other variables. You can select different constant by clicking the “target” icon
• Input the Position Size or Margin size while watching the PnL of the Stop Loss
  
  • Increase or decrease the size of the position, until the PnL of the Stop Loss is at the level you want it to be

This way you can control exactly what your exposure is, while understanding all the variables involved. You can even add multiple Stop Loss orders, which can help you limit the exposure in lower conviction plays, such as new set-ups.

The next article will be about Stop Losses.

People especially newbie ignore this stuff. Their goal is to have huge profit so they often tend to risk a huge percentage of their portfolio. They don't think about any risk and just think of the outcome if the market favors their side. They will just realize their mistake when their portfolio is more than 50% down.

Learning those strategies requires strong discipline to control their emotion which is the most important for me to avoid huge loss in trading. Even experts sometimes forget their trading strategy because of greed.

~snip

Mentor and influencers are different things. If you know a person that helps you personally, and either do not help anyone else, or maybe a few other people with you and you chat with them and you ask questions and they answer and basically it is a friendly environment then it's fine and they are mentors.

It is true that mentors are needed to guide us so we don't make wrong decisions, because usually mentors are more experienced and can direct us when trading. Most importantly we need to find a trusted mentor, because nowadays there are so many frauds, so we really have to be careful in choosing a mentor. I suggest looking for a mentor from a trading course on a popular and trusted platform. Although the cost is quite high, most importantly the mentor can be trusted and can make us understand how to trade properly.

It can be riskier if we don't have knowledge and skill about this and I suggest those who come and try trading must invest their time knowing the market first and have some mentor to assist. I'm not going to say we should have to keep this person forever, it is just the days when we are in the learning process. In this way, we are able to understand how that trading works and simply guide us to a better choice of coins to trade and the basis of it. It can't be simply ( a different view to others) and that is why we need to take this seriously otherwise.

Stop loss is indeed important in trading but not in the case this time, we'd rather use the volatility of the market to buy and sell, and make a profit from it, not losses. Experienced traders might not seem to have a problem in bear season, it was those starters or beginners as I know the current situation is too risky. That is why I don't push people (beginners) to do trading but instead spend this time familiarizing the market behavior and making ready for the upcoming days when this is over.

Stop loss is indeed important in trading but not in the case this time, we'd rather use the volatility of the market to buy and sell, and make a profit from it, not losses. Experienced traders might not seem to have a problem in bear season, it was those starters or beginners as I know the current situation is too risky. That is why I don't push people (beginners) to do trading but instead spend this time familiarizing the market behavior and making ready for the upcoming days when this is over.

When someone wants to be a trader and exist here for long term then its important to know their limits which is based on their financial level, financial goal and time availability for all these stuffs. Better avoid doing the day trading or even looking at the price chart for too long because it will create panic situation which can even leads to wrong decision. Better to use the stop loss all the time so it can save from the sudden dumps which happens on the market.

LUNA was one of the horrific incidents I've ever experienced, and indeed stop losing is very important,
but when we do it for real and sell at 10% or at -10% it will certainly be difficult to do,
because I believe 90% of traders are dissatisfied with that result and continue to hold until maybe 10x then they sell, and that's a fact that I see.

Being a trader and trying to avoid losses is a phenomenon that is more than understandable, but very rare and difficult. Do not expect such a solution to the problem.

It can be riskier if we don't have knowledge and skill about this and I suggest those who come and try trading must invest their time knowing the market first and have some mentor to assist. I'm not going to say we should have to keep this person forever, it is just the days when we are in the learning process. In this way, we are able to understand how that trading works and simply guide us to a better choice of coins to trade and the basis of it. It can't be simply ( a different view to others) and that is why we need to take this seriously otherwise.