Risk management is crucial because it can help traders control losses and retain principal when they see the wrong direction, thereby achieving long-term survival and profitability. 1. When setting stop loss, you can use the percentage method (such as 5%-10%), the technical support level method (set below the key support) or the fixed amount method (determined based on the maximum loss that can be beared); 2. When setting stop profit, you can use the resistance level method (near the key resistance), the risk-return ratio method (such as 1:2 or 1:3) or the mobile take-profit method (moving the stop loss point dynamically as the price rises); 3. The allocation of funds should follow the risk control of a single transaction within 1%-3% of the total funds, diversify investment in multiple high-quality assets to reduce non-systematic risks, and adopt batch position building and closing strategies to optimize costs and benefits. Always implementing a stop loss and take profit plan, controlling a single risk exposure, and reasonably allocating funds are the core principles of building a stable trading system. Only in this way can we move forward steadily in the highly volatile digital asset market.

Recommended official website address of mainstream currency exchange in the currency circle

1. Binance Binance:

2. Ouyi OK:

3. HTX Huobi:

4. Gate.io:

1. Why is risk management crucial?

The digital asset market is known for its violent fluctuations, and prices may experience substantial rises or falls in a short period of time. Without a mature risk management strategy, traders are prone to lose control of their emotions in sudden market changes, making irrational decisions to chase ups and sell downs, which ultimately lead to major losses. The core purpose of risk management is not to pursue profit every time, but to effectively control losses and keep the principal when you look at the wrong direction, thereby gaining opportunities for long-term survival and profitability.

2. Stop loss and profit: a powerful tool to lock in profits and cut off losses

1. How to set a stop loss?

The purpose of stop loss is to automatically close the position to limit the expansion of losses when the market trend is opposite to your expectations. A good stop loss point should not only give you a certain amount of room for fluctuation in the assets you hold, but also leave the market in time when the trend is confirmed and reversal.

Percentage method: the easiest and most direct method, that is, set a fixed loss ratio, such as 5% or 10%. When the asset price falls from your buying price to this extent, execute a stop loss. This ratio should be determined based on your risk tolerance and the volatility of your assets.

Technical support level method: find the key support level (previous lows, important moving averages, etc.) on the chart, and set the stop loss point slightly below the support level. If the price falls below the key support, it often means that the downward trend may open and is a reasonable time to leave the market.

Fixed amount method: determine the maximum amount of loss that you can bear in a single transaction, and calculate the stop loss price based on it. This method can give you a clear understanding of the maximum risk of each transaction.

2. How to set a stop profit?

Resistance level method: In contrast to stop loss, the take-profit point can be set near the key technical resistance level (such as the previous high point, the upper track of the trend line). These positions usually experience strong selling pressure.

Risk-reward ratio method: Plan your risk-reward ratio before trading, such as 1:2 or 1:3. If the stop loss you set is 10%, then the take profit target can be set at a profit of 20% or 30%. This is a very professional strategy.

Move take-profit method: When the price moves in a favorable direction, constantly adjust your stop loss point upward to protect the profits you have obtained. For example, every 5% increase in the price will also move the stop loss point up by 5%.

3. Fund allocation: Determine how long you can play on the poker table

1. Single transaction risk control: It is recommended to control the maximum loss of a single transaction within 1%-3% of the total funds. This means that even if you encounter several stop loss in a row, the impact on the total account will be relatively limited, and you still have sufficient capital to make a comeback.

2. The principle of diversified investment: Don’t pin all your hopes on one project. The funds can be moderately distributed to several high-quality assets that you have studied in-depth and irrelevant to disperse non-systematic risks. But note that excessive dispersion can also dilute profits, and it is important to find a balance point.

3. Build and close positions in batches: Avoid "all-in" at a certain price point at one time. You can buy in pyramid or batch mode. If the price is still optimistic, you can appropriately add positions to lower the average cost. Similarly, it can also be done in batches when selling to obtain a smoother average selling price.

Editor's summary

Successful transactions do not come from predictions that come out of every possible way, but from rigorous risk management and consistent discipline. Please remember three core principles: set up a clear stop loss and take profit plan for each transaction; control the risk exposure of a single transaction, and never let a loss affect the overall situation; reduce overall risks through reasonable allocation of funds and asset allocation. Internalizing these principles into your trading habits, you will be able to deal with the changes in the market more calmly and go further in your long-term trading career.

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