Risk management
What separates people who last in the market from people who lose everything isn’t being right more often: it’s losing little when they’re wrong.
The 1-2 % rule
Don’t risk more than 1-2 % of your money on a single trade. With €1,000, risking 1 % is €10.
Example: you have €1,000, you want to risk €10 and you put your stop-loss 5 % below your entry.
Trade size = €10 ÷ 5 % = €200. If it goes wrong, you lose €10, not €200.
Trade size = €10 ÷ 5 % = €200. If it goes wrong, you lose €10, not €200.
Risk / reward
Before entering, decide where you’ll get out if it goes wrong (stop) and where if it goes well (target). Aim to win at least twice what you risk.
Entry 100 · Stop 95 · Target 110 → you risk 5 to win 10 → ratio 1:2.
With a 1:2 ratio you can be right only 4 times out of 10 and still make money.
With a 1:2 ratio you can be right only 4 times out of 10 and still make money.
Other rules
- Only invest money you won’t need in the next few years.
- Diversify: don’t put everything into one coin or company.
- Have a plan before you enter and don’t change it because of emotions.
- After a loss, don’t try to “win it back” quickly with a bigger trade.
Practise all of this in the Simulator with fake money before using real money.