On the crypto market, unforeseen events often occur that can lead to losses. RBC-Crypto experts explained how not to become a hostage of unprofitable deals and why it is important to get out of them correctly.
Risk and its limitation
Events that cannot be predicted or somehow predicted are not uncommon in the cryptocurrency market, says Mikhail Karkhalev, financial analyst at Currency.com crypto exchange. In most cases, such events cause losses for traders, and you need to be prepared for them, he adds.
Before opening a position, you always need to understand where the stop loss will be located, and where the averaging will be, advises Andrey Podolyan, CEO of the Cryptorg crypto exchange. Without this understanding, in his opinion, a trader will not feel comfortable in a trade, and there is a high probability of impulsive ill-considered decisions, often leading to additional losses.
You can set a stop loss at the nearest significant support or resistance level, advised Ivan Petukhovsky, co-founder of the EXMO crypto exchange. In his opinion, it is better to close a losing position immediately after the loss has exceeded the calculated risk value.
When is it better to wait out
There are situations when you can wait to get out of a losing position to zero or a small plus, says Karkhalev. But in such cases, you need to understand what caused the decline in quotations, the analyst added. According to him, if this is a fundamental event that turned the market upside down, then it is better to exit the position.
“If the price is in a certain expected range and does not bode well, and the amount of capital allows you to sit out the drawdown, then you can wait out the loss, but in any case, the stop loss must be set at the level that will become critical for you,” he explained Karkhalev.
When trading cryptocurrency, as in transactions with other assets, it is important to follow the rules for managing working capital, Podolyan recalled. He noted that with its correct distribution, it is not a problem to average a losing position several times and pull it into profit.
“For example, I often use the tactic when I enter 1/4 of the working volume, and deliberately place three or four limit orders below the entry point. If the price goes against me, then I get a better entry point and load the entire volume into work, ”the expert explained.
Many traders, with a strong move into the negative, transfer the position from short-term to long-term in the hope that after some time the value of the asset will rise again and allow it to get out of it into a plus, Podolyan said. In his opinion, with the correct distribution of working capital, this way you can wait out difficult times in the market.
“Capital management is very important. If its rules are not followed, then it can be very difficult to sit out losses, ”the expert noted.
This approach may only make sense for long-term investing on a spot platform, Petukhovsky added. He explained that applying this approach to margin trading would lead to significant losses.
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