Crypto risk
How volatile crypto is, how to size a position and how to manage risk.
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Lessons
- 01How volatile is crypto?Crypto is one of the most volatile markets you can trade. Even the largest coins can move several percent in a day, smaller coins usually move more, and Bitcoin has fallen more than 70% from a peak more than once. You measure volatility as the usual size of moves in percent, which lets you compare any two coins.
- 02How to size a crypto position.To size a crypto position, divide the money you accept losing by the distance from your entry to your stop. With $100 at risk, an entry at 50,000 and a stop at 47,500, you buy 100 ÷ 2,500 = 0.04 coin, a position worth $2,000. Round down to the exchange's order step and allow for fees.
- 03Risk management for crypto traders.Crypto risk management is a set of limits fixed before you trade: how much one trade can lose, how much all open trades can lose together, how much leverage you use and where you keep your coins. It matters more in crypto because prices move fast and some losses, such as an exchange failure, never show on a chart.