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My Insight into the Significance of Risk Management when Trading Crypto

My Insight into the Significance of Risk Management when Trading Crypto

By David - 01-Feb-2020

I recently stepped up my risk management game, and the resulting benefits couldn't be clearer. Hopefully this post can help anyone understand why.

First - a little context...

My best subject at school was maths because its mostly just logic. I basically flunked any subject that required studying because I simply do not have the attention span to efficiently digest large quantities of information. As a result, I've always learned best through practice and repetition, along side my own intuition and common sense. This is how I approached trading when I discovered Bitcoin & Altcoins around August 2017.

Side note - if you are able to read, and want to fast track your way to competent trading, I strongly recommend checking out @CryptoCred's post covering all the basics. The man is the resource Goliath of crypto twitter.

Anyway... since January this year, I started applying real strict, rational risk management practices into my Bitmex trading. Things like:

  • ALWAYS ALWAYS use a stop loss
  • Try to only ever risk 1-2% of Bitmex balance per trade.
  • Try stick to trades with 2R+
  • Never rush into trades without a plan.

Below is a visualisation of why I should have applied these practices long ago...

stepped up my risk management game

This is my Bitmex balance history since Jan '18 - (check yours @ Coin Market Man now) Use code BLOG10 for 10% off all purchases

All the blue dots are deposits (Im very not in profit)

All the green bars are days ended in profit, and red bars = days ended in losses. Look at how wild my swings were in the year of 2018.

Just look at how much calmer those swings have been since my most recent deposit in January 2019. This is where I started to implement my risk management strategy.

The amazing thing is, I still have more red days during this most recent period (lower win ratio), but I'm still close to break even because my losing trades were well managed, and most of my winning trades are making up the losses.

This graph alone paints a clear visualisation re-enforcing the significance of risk management and why you should take it more seriously if you do not already. Never felt more confident in my current strategy. Might even visit the realms of profitability this year, who knows?

David Kanzen
Coin Market Man