There comes a moment for every trader when they have to decide whether to stay in the market and continue trading or realize that the market and trading are not for him.
This question usually arises after a novice trader is faced with the first losses on the exchange. Most market participants overcome this stage before starting to earn steadily.
Let’s see how to avoid serious losses and learn how to control the funds.
The basics of money management
The skill of asset management is the first lesson in trading, as it helps to protect your funds.
Start by diversifying your portfolio by allocating funds to various assets and markets. Diversity will reduce the risk and reduce the impact of individual unsuccessful trades on the overall result.
Direct 70% of the total deposit to trading on the spot market. Then distribute the funds of the spot wallet among various pairs for trading, while allocating most of the funds to launch bots on a highly capitalized cryptocurrency.
- Allocate up to 30% deposit for Bitcoin trading
- leave 20% for trading Ethereum or other cryptocurrency capitalization leaders
Distribute the remaining 50% for trading in less liquid pairs. Use the capitalization of coins to evaluate the infusion of your own funds into them.
For example, if you have discovered the potential of a coin that has recently been added to top exchanges such as Binance or Bybit, it is recommended that you allocate the smallest share of your deposit to it.
The remaining 30% of the total deposit can be allocated for speculation in the futures market and also distributed according to the top capitalization.
Risk management is the key to success
Trading is not about the pursuit of maximum profit, but the ability to effectively manage risks. Well-timed acceptance of losses allows you to save your deposit and form the basis for profitable trading.
Remember the main rule for risk management when building your trading strategy, especially when using trading bots: always use a profit ratio of at least 1:2 or higher.
This means that in each trade you should aim to get at least twice as many profit than the sum of potential losses in order to compensate for possible negative results. This is important for maintaining and growing your deposit in the medium and long term.
Avoid using high shoulders and make sure to have an additional margin on the futures account.
On the Veles platform, you can use averaging tactics. A simple interface and advanced options allow you to average a position and close a deal with a profit in the event of a price reversal.
The following are the main risk management functions on available the Veles platform:
- Certain range of order placement
- Martingale function to increase the volume for each subsequent order
- Stop loss at breakeven – setting the bot to exit the position at the price of the previous take or at zero
No matter how verified and promising a deal may seem, approach trading consciously.
