Trading
Risk management is the set of rules that decide how much you lose when you are wrong, which is the only variable you fully control. The core practices are risking a small fixed percentage of your account per idea, setting an invalidation level before entering, sizing the position from that level rather than from how confident you feel, and never using leverage you do not fully understand.
Why this matters more than anything else
Most people who leave crypto did not leave because they picked badly. They left because one position was too large, and a normal drawdown became an unrecoverable one.
You cannot control whether you are right. You can control exactly how much it costs to be wrong. That is the whole discipline.
The math nobody wants to look at
| Loss | Gain needed to break even |
|---|---|
| 10 percent | 11 percent |
| 25 percent | 33 percent |
| 50 percent | 100 percent |
| 75 percent | 300 percent |
| 90 percent | 900 percent |
Position sizing, concretely
Decide what you risk per idea
One to two percent of the account is the standard. On a 5,000 dollar account that is 50 to 100 dollars at risk, not invested.
Find your invalidation level
The price at which your reasoning was wrong. Below the pattern low, below support, wherever it genuinely is.
Measure the distance
If you enter at 100 and your invalidation is 92, you are risking 8 percent of the position.
Calculate the position size
Risk amount divided by risk percentage. 50 dollars divided by 8 percent gives a 625 dollar position.
Place the stop and leave it
Moving a stop further away to avoid being wrong is the single most expensive habit in trading.
Leverage, plainly
Leverage multiplies both directions. At ten times, a 10 percent move against you eliminates your entire deposit. Crypto moves 10 percent routinely, including overnight.
| Leverage | Move that liquidates you | Realistic timeframe |
|---|---|---|
| 2x | 50 percent | Weeks to months |
| 5x | 20 percent | Days |
| 10x | 10 percent | Hours, sometimes minutes |
| 20x | 5 percent | Minutes |
| 50x | 2 percent | A single candle |
Rules worth adopting
- Never risk more than you can afford to lose entirely. Not as a slogan. As an actual calculation about your rent.
- Decide the exit before you enter. Both exits: where you are wrong, and where you take profit.
- Never average down without a plan. Adding to a loser because it got cheaper is how small mistakes become large ones.
- Keep position sizes uniform. Sizing up because you feel confident is exactly backward. Confidence is not information.
- Take some profit on the way up. Nobody has ever gone broke taking profits, and plenty have gone broke waiting for the top.
- Keep a record. Entry, exit, reasoning, outcome. Patterns in your own mistakes are invisible without it.
The part that is actually hard
All of this is simple to write and difficult to do. The difficulty is not intellectual. It is that markets are designed, structurally, to make you feel exactly the wrong thing at exactly the wrong moment.
They make you feel confident at tops, when everything has already gone up and it looks obvious. They make you feel terrified at bottoms, when everything has fallen and it looks like it will keep falling. Rules exist specifically so that decisions get made before the feeling arrives.
Common questions
How much of my portfolio should be in crypto?
We do not give financial advice and cannot answer that for you. What we can say is that the answer should be a number where a 70 percent drawdown would be disappointing rather than life changing, because that has happened repeatedly.
Should I use a stop loss?
On leveraged positions, unambiguously yes. On spot holdings it depends on whether you are trading or investing, and the important part is deciding which of those you are doing before you enter.
What is a good risk to reward ratio?
Many traders look for at least two to one, meaning a potential gain twice the size of the risk. That lets you be right less than half the time and still come out ahead.
I already lost a lot. What now?
Stop trading for a while. Losses push people toward larger positions to recover faster, which is how a bad month becomes a terminal one. Reduce size dramatically, or step away entirely until the pressure to get even has faded.
Where to go next
Build a risk framework that fits you
We work out position sizing on your actual account, set rules you can follow, and talk honestly about how much exposure makes sense given everything else in your life.