Hi, fellow Steemians,
Here is the 3rd part of the Trading serises that I have been writing. You can check out the 1st part and 2nd part here.
But first, let me ask you a question
If someone comes to you and asks you "Hey, I have an absolute trade that will give you a bunch of money in the future."
Sounds great, right? What should you do in that case?
- Accept the offer immediately
- Ask back the stranger "How much money I will have?"
- Ask back the stranger "How much percentage that I can expect from your project?"
What answer have you likely had in your mind?
Let's analyze those answers together.
The first one is to accept the offer immediately. Is it suitable to take that offer without analyzing the project carefully? I would say that it is a very risky answer and solution. Then, the second one, we can see that the return factor has involved. The question implies the motivation to make money and want to know more about the amount of money that you can have.
The last one is stellar. Returns shouldn't be ranked on the benchmark with numbers, but rather in ratio. When it comes to measuring profit, we should always put back to the ratio of total investment.
I have answered those questions, now what?
The ratio of return is great to ask, but not enough. The question that you should ask is:
-What is the percentage of return and what is the rate of chances that I lost this investment?
Let's face it. We are living in the world that is full of uncertainty, and we are trading on very young financial markets. Let's face it again, there is always risks out there, especially to the financial markets and crypto.
Yes, I am talking about the importance of Risk Management
There is no reason that the insurance industry is developing rapidly. Buy an insurance contract is like buying a hedge contract in which you hedge your risk to others and share a minimal risk.
It's the same for Stop-loss
The Stop-loss is a function embedded in an order that lets you stop your loss. Let's think in that way:
- Bitcoin price is around $6000, and you decided to buy 1 Bitcoin, waiting for it to come to $7000 to book your profit.
- Things get salty, and Bitcoin drops to $5400. It's a 10% loss on your initial investment. What should you do? HODL or sell?
- You have decided to HODL and Bitcoin took a significant hit down to $3000. You have divided your capital into half and had no capital left to trade.
Have you been in that scenario? I have been there, many times.
As you can see from the case above, while trying to HODL your coin, you have lost the opportunity to buy back BTC when it reaches $3000. Do not be like me, set your Stop-loss.
How much should I set for the stop-loss?
It pretty much depended on your risk capability. Now I am trading with very tight stop-loss at 10% and take profit at 15%. So that in salty case, I will sell at 10% loss and can buy back later.
Let's take a look at the example below:
- Buy order: 1 BTC at $6700
- Stop-loss: $6300
- Rebuy: $6000
As you can see, the price dropped to $6300, and I had a loss of $400, total capital back: $6300.
But as the price dropped down to $6000, a re-buy order had completed.
So total, I got 1.05 BTC. And in that case, BTC need to rise to $6381, and I had covered back to $6700.
The above is just a sample for Stop-loss order and how to implement with re-buys.
I hope that you have got some point from my post. Please do let me know if you have any comment or want to contribute anything.
Thank you and see you next time.
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@attoan.cmt very great tip you explained with us. This is very helpful to me. Eventually till now i also used to HODL but now i understood this concept very well and i will follow this. Really appreciative.. keep providing these type of stuff.
HODL is good for long-term investment in a really good project. As a trader combined with HOLDer, I combine two technique: Daily trade with stop-loss and Trade in HOLD to increase my coins. I will share more about the Trade in HOLD in coming days.
@attoan.cmt yes please take out much more about HODL.
@attoan.cmt can you please figure out some good project for HODL..
@attoan Let's analyze those answers together.
The first is to accept the offer immediately. Is it appropriate to take that offer without carefully analyzing the project? I would say it is a very risky answer and solution. Then, the second, we can see that the return factor has been involved. The question involves the motivation to earn money and you want to know more about how much money you can have. excellent detail friend @attoan
@attoan.cmt Realy i can stop treading loss?
you can set the stop-loss order automatically using Bittrex, Binance or many popular platforms. In case you do not want to set Stop-loss, you can set alert to inform and sell at some price.
First time know this information from you. Thanks.
You are welcome. Let me know if you need any information.
https://steemit.com/iq/@noorsamad/never-loses-trading-strategy-on-iq-option
Great tips. Stop loss let you trade without getting excited!
This post has received a 29.7 % upvote from @boomerang.
Awesome content!