Are you ready to lose? (and what to do if you are not) for BITSTAMP: BTCUSD by Nico.Muselle – Technische Analyze – 2023-01-17 13:42:53

A new trader, let’s call her Sarah, has just started trading in the cryptocurrency market. She has read articles and watched videos about trading, but has not taken the time to develop a solid trading plan or to gain a good understanding of the markets and the underlying assets you are trading.

Sara sees the value of bitcoin going up, she doesn’t do any additional research or analysis, she doesn’t set a stop loss or take profit level, she just buys bitcoin With the expectation that she will make a quick profit.

Unfortunately value bitcoin It doesn’t work as well as Sarah had hoped, and instead of going up, it starts going down. Sarah gets worried and starts checking the value of bitcoin more frequently, and since she didn’t set a stop loss, she sees that her position keeps losing value. In the end , bitcoin He loses a lot of value, which Sarah is forced to sell at a huge loss.

Frustrated, Sarah begins second-guessing herself and her abilities as a trader. She did not have a plan or strategy, she did not manage her risk properly and she did not have a clear understanding of the markets and the underlying asset. It has not prepared for the possibility of losses and has no plan to exit losing positions.

😭😖😞 Unfortunately, the above story is very common in trading, so how can we prepare ourselves for losing trades?

☝🏽 Prepare for the risk of losses An important part of risk management and can help traders reduce the impact of losses on their trading capital. Some ways to prepare for the risk of losses include:

1️⃣ Set Realistic Trading Goals: Traders should set realistic goals that take into account the risks inherent in trading and the potential for losses. By setting realistic goals, traders will be better prepared to deal with losses when they happen.

2 ️⃣ Developing a risk management plan: This includes determining the appropriate size for each deal, placing stop-loss orders and evaluating the potential return in relation to the potential risks. This can help limit potential losses and protect trading capital.

3️⃣ Maintaining an appropriate risk-reward ratio: This means that the potential return of trading should be greater than the potential loss. This helps ensure that the potential reward justifies the potential risk.

4️⃣ Portfolio diversification: By distributing capital across a variety of markets and instruments, traders can reduce overall portfolio risk and reduce the impact of losses in a single market or instrument.

5️⃣ Building a trading cushion: This means keeping a capital reserve that can be used to absorb losses and maintain the trader’s ability to continue trading. This cushion should be large enough to withstand a series of losses, but not so large that it affects the trader’s ability to trade effectively.

6 Prepare Emotionally for Losses: It is important to remember that losses are a normal part of trading and not allow them to affect you emotionally. By preparing emotionally for the possibility of losses, traders will be better able to handle them as they occur.

7 – Develop a plan to exit losing positions: Having a plan to exit losing positions helps reduce the impact of losses on the portfolio. This can include setting a stop loss or take profit for pre-determined targets.

⚠️ Remember that it is important to accept it Losses are a normal part of trading And they do not reflect the ability of the trader. By preparing for the possibility of losses and implementing a solid risk management plan, traders can reduce the impact of losses and increase the chances of success in the long run.

I hope this was helpful to you, and if so, please leave a like or comment below.

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