Topic: Risk management (Read 283 times)

For my view, I think the best way for risk management is to determine what you want to go in there and do. So in between the two you mentioned, I think stop loss better serve the purpose of risk management because you determine what you want to lose. Trailing stop is more like a scary man's tool, unprofessional and never maximizing risk taken when it is profiting.

The fact is that in most cases you will burn dozens of small profits waiting for years for 1 good trade that in final won't cover all those losses or lost opportunities due to greed. Especially in this bear market. I've triple my amount of bitcoins since march 2018 when almost all coins dropped close to 80%. With your strategy i would exit all trades with break even at best.
Your strategy will work with strong bull market only on good coins.

Those ratios are counted before entering. You see that closest support is 1% lower and closest resistance is 5% higher so you have 1:5 ratio entry. If price will rapidly break resistance or show strenght and good buy formation under resistance you can stay longer with your trade modifying it seeing how price is changing.

this is just an example. i did mention "assume"

good points about risk management thanks

I think that 1:1 or 1:2 or 1:4 risk reward ratios are all the same. They all limit your possible profit. You are limiting your potential reward by exiting too soon. There are runs that can make you a lot of money. In them, risk reward ratios are as large as 1:20 or 1:30. But you are exiting too soon. It is much better to take some profit, like exit half of your position at break even, and let the rest run as high as possible. These are real winners that many traders are missing because they exit too soon.

Doing risk management is very important, because when we trade we will have a benchmark and limits in making decisions. Risk management will be very useful when we have difficulty making decisions, there will be a picture and graph that will require us to make an analysis. This kind of thing must be owned by every trader, without risk management then it is as you say that we will fail.

Yes when i jumped in to crypto trading, i dont make any risk management and that why i always get loss. Now i already make risk management by use stop loss for each trade, and stop loss always lower percentace than take profit. For example if stop loss 4% the take profit will be 10%. Never jump in trading if we dont have any risk management because we will never make money.

I see your risk management is like gambling because 1:1 is not healthy for me but 1:2 is the right one. Higher profit using low asset is the key but disciplines with our rules is necessary. Every calculation depend how much we have and how realistic the target. Think twice because market is in red zone right now.

You points are really valid,the first step for a trader should be to manage risks,and not going all out to maximize profits and lose all investment power
It's a bad method of approach and is wrong,maximizing risks is much better that incurring losses that could probably have been avoided.
Traders who lack patience and do not put this into practice usually run themselves down quickly

Platforms such as Bitmex made things far worse, because even the most insignificant price movements can be leveraged to book like 25-50% gains.

If people trade to book x percentage of profits per day, which they set for themselves as target, they'll force themselves to trade even when most experienced traders decide to take a day off. It's not for nothing that some traders have become addicted to trading, which people might consider funny, but it can be as bad as a gambling addiction.

Gone are the days where profits were easy to obtain by utilizing the $6000 support level. I tried it after it broke, but rekt myself and haven't done any trading since.

I think this was the biggest thing holding me back when new to trading and probably many others too. It doesn't even have to be with good risk reward ratios (it can be more common sense than technical). People get stuck in the habit of trading and through success turn to permanent optimism. They think they can predict the market all the time and then take up risky positions for small returns.
 

there are many traders who dont care about risk reward trust me this is what necessary to survive in trading

so how to do it
 
case 1= 80% accuracy 8/10 trades are profitable RR IS 1:1        (2$ SL AND 2$ TP ) good trader accuracy
16$profit / 4$ loss  = 12$ profit
case 2=50% accuracy 5/10 trades are profitable RR is 1:1      average trader accuracy
10$profit /10$ loss=0$ profit
case 3 =30% accuracy 3/10 trades are profitable RR is 1:1      bad trader accuracy
6$profit/14$ loss=14$ loss

now accuracy is same but lets increase RR ratio 1:2             (2$ SL AND 4$ TP)
case 1= 80% accuracy 8/10 trades are profitable RR IS 1:2
32$profit / 4$ loss  = 28$ profit
case 2=50% accuracy 5/10 trades are profitable RR is 1:2    
20$profit /10$ loss=10$ profit
case 3 =30% accuracy 3/10 trades are profitable RR is 1:2    
12$profit/14$ loss=2$ loss

compare RR 1:1 and 1:2 see how profit increase and loss decrease doing like this will give you confidence because you know the risk

Now lets learn something about position sizing

here comes question   whether to buy same quantity for all Risk reward trades
no

good RR trade 10coins lets assume  ( 1$ is SL and 4$ is take profit )
10 coins   40$ profit /10 $ loss
suppose you want to increase risk you have to manage with quantity size so that it will match your RR  ( 2$ is SL and 4$ is take profit)
5 coins    20$ profit/10$ loss
see risk is same this is how you trade more risk trades

1) what to do is you dont get good RISK REWARD TRADE
simple dont trade that day protect your capital and search for trades next day

2) how to increase accuracy  
you have to do that by learning and developing new strategy and system

3)dont take trade which is less then 1:1 RISK REWARD

4)do this if you are making loss

5) good trading is all about managing risk because thats is what you can control you dont know how much reward you will get you cant control it