Risk Control and Constraints - Cryptocurrency Exchange

Chasing profits is certainly important,

but even this fundamental driving force, when compared to risk control and constraints—these necessary conditions—

it must take a back seat.

"Keep a penny in mind,

and the pound will take care of itself."

"Keep losses in mind,

and profits will take care of themselves."

1. Limit the risk of each trading position.

Establish a maximum loss limit per trade,

for example, 1%-3% of capital.

This is merely to help reinforce constraints,

controlling losses in an objective and systematic way.

Another approach is to make the risk of each position equal to the minimum margin required for that trade,

limiting risk to a certain proportion of that margin.

Matching acceptable risk to a fixed proportion of margin is a reasonable strategy,

especially for futures trading.

Stock traders can limit speculative trading risk based on investment value,

with limits set between 15%-20% of the investment amount.

2. Avoid overtrading.

Overemphasizing short-term speculation

makes successful trading impossible.

3. Cut your losses.

Any position established should clearly define an exit point (stop-loss point).

If the position moves against your expectations from the start,

placing a correct stop-loss

can help you exit the market within a reasonable loss range.

But if the market begins to move favorably,

bringing unrealized profits to your account,

you should adopt some strategy to push the stop-loss price,

so that in case of market reversal,

you do not turn substantial unrealized profits into large losses.

It is recommended to adjust your stop-loss price after the market closes on Friday,

by an amount equal to 50% of the favorable price movement during the week.

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