This article has been translated from English to Gen Z Slang.
Yo fam, in past seshes of this "Beginner’s Guide to Trading Crypto", we've been flexin' our skills on fundamental shenanigans to cook up trade ideas, then we dove into that technical shizzle and price vibes to suss out when to jump onto a trade. 💪
BUT, fam, before you go ham on opening a legit position and bet your Benjamins, it's totes crucial to whip up your game plan for trades and make sure you ain't riskin' it all recklessly. 😎
Saving those bucks is the VIP move when you're rolling the dice in the market. 💸
👉 Can't drop this enough times.
If you're tryna hold onto your cash stack, you gotta get smart with risk! 🚀
The GOATs in trading snip those losses pronto and let their wins vibe free. ✂️🤙
This right here is how we ghost outta those nightmare moments where our green friends turn red and ruin the party.
No cap, hittin' "cutting losses quickly and letting the W's ride" ain't as breezy as it sounds, more so for the peeps makin' calls on the spot, tryin' to juggle the fundamentals, the big picture vibes, and the price action show (yeah, they be clashing sometimes). 🤷♂️
Luckily, trade and risk management (“TRM”) hacks ain't rocket science to get a grip on. 💡
Three Deets You Gotta Know About Trade and Risk Management
The three spicy tips you gotta nail before jumping in are:
- Stop losses
- Position sizing
- Scaling
Let's vibe on these deets real quick. ⏬
What's a stop loss?
A stop loss is like your emergency exit in the trade plan where you decide it's time to ghost outta the position.
This exit could vibe off a price move, techy indicator blips, fundamental scenes, or all of 'em telling you your trade thesis just took an L.
Learn more on stop-lossing like a pro in School of Pipsology, "What is a Stop Loss?" 🌟
What's position sizing?
Position sizing is like choosing how much crypto you're gonna YOLO, figuring out max damage you're cool with if things flop, also known as "max risk". 🚀
Beginners, keep the max risk chill at more than 1% or 2% on quick moves and chill at 5% on the slow rolls.
Say you got $1,000 for crypto and you're eyeing a token at $10 each.
You wanna cap your max risk at 2% of your stash (or $20), with your brainy calculations setting the emergency exit if token nosedives to $5 level. 🤓
With this vibe, your play at $10 should be 4 tokens. If the token blows up by $5—for 4 tokens that's you taking an L of -$20 (2% of that $1000 stash).
Get schooled on position sizing at School of Pipsology, "Position Sizing". 🧠
What’s scaling?
Pinning the exact moment or price when the market does a 180 is like searching for a unicorn. 🦄
If you ain't 100% sure about a price you wanna dive into, breaking your entries and exits into a few orders around your point is smart.
Following the position sizing deets, if you're eyeing $10 for a token but reckon it might drop to $8 before it's all smiles, what to do?Don't be that person who places everything at one level and misses out. Instead, split your orders among different price vibes.
Instead of snagging 4 tokens at $10, go for 1 token at $10, another at $9, and two at $8. 😎
This way, you're in the mix if it never dips below $10, and if it crashes to $8, you scored a cooler average price of $8.75.
Keep that exit at $5, and bam, your risk is down to $15 of the whole account risk. Better vibes, less panic. 🙌
These are simple examples, but grasping these tricks will keep you from taking nosedives early on. 🔥
For more scoop on scaling, hit up School of Pipsology's, "Scaling In And Out Of Positions". 📚
NEVER FLEX WITH LEVERAGE!
Leverage trading's where you open up big positions larger than your actual dough.
You can do this through crypto CEXs offering margin plays, or some DeFi setups allowing you to go wild.
For instance, you got a $100 sack and you're aiming to snag 1 unit of XYZ token at $100, creating a $100 worth position.
A crypto cult (CEX) might only need a 10% baby stack to open that gig. In plain translation, you drop just $10 instead of the entire $100.
And voilà, you still got $90 "to play around" with. Sounds tempting? 🤔
Let's say with that 10% requirement on a $100 account, and you open 10 XYZ tokens, having a brave notional value at $1000 ($100 x 10), and the CEX holds your $100 for security.
Now you're playing chess at a 10x level leverage—madness level. 💀
If this token rises +10% (from $1000 to $1100) pronto, you'd double that account value!
From $100 to $200 ($100 gains + the $100 cool-off cash). Or if that thing rockets a +20% to $1200, now we talking about tripling it up to $300!
Sounding dope right?! Bet now you're already planning the Lambo purchase. 🏎️
This is how fresh faces in trading get dazzled by leverage—they thinking all day about that $$ rain! 💦
Sorry not sorry, but leverage's a double-edged thing, fam—it can ruin your game as fast as it can help it glow up. 😬
Imagine the madness if that position drops by 5% (or -$50 from the starting $1000)—poof, you lost half your $100 account!And worse, a 10% drop makes that $1000 position hit $900 (or -$100 hit)! Here comes the margin call—asking you to pony up more cash to keep afloat. If you can't, the CEX pulls the plug, a.k.a. you're "liquidated".
The $100 security? Gone to cover your losses. And ouch, your bank says $0 👀!
Now you're back at it, asking momz for your room back. 😅
Yes, making mega cash fast with leverage is totally on the menu, but losing major $$$ is also wild. ⚠️
So if you're a fresh-to-the-scene trader, let's be real about trading fails.Chances are slim you'll pick the moves perfectly to dodge an account explosion in 10 leverages? Or 20?
If you're thinking "zero odds", you nailed it. ✅
Leverage might shine for skilled peeps with tight risk rules.
It's a no-no for newbs figuring out trading missteps to start. 😐
Wrap-Up
Better be chill with the risks you're taking and keep the bucks on deck for your A-game ideas only.
Here's some pro-tips newbies should vibe with:
- Keep the crypto chunk of your dough small, fam (think cash, stock stuff, liquid things). Start with 1% and glow from there. 🔥
- Keep it low-key with specific crypto asset shots—1% – 2% on quick smash & grab trades, 5% max on the slow ride.
- Always bring a stop loss to the party.🛑
- Timing ain't perfect—scale into trades or "dollar cost average" for those long hauls. Grab profits if things go lit. 💰
- LEAVE THAT LEVERAGE ALONE. 🚫
- Flex cash on your best plots (low-risk/high-reward stunts on those big-win ideas).
- "No play" is chill when opportunities are whack. 😅