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Money management is probably one of the most important concepts in investing.
If you lack a competent approach to the calculation of the lot size, your account
will be a non-starter regardless of your trading strategy. I hope that together we
will puzzle out how to calculate your risks.
So now read carefully the main rules of money management which I define for
the cryptocurrency market.
10% of the risk in one trade. That is, if you enter one trade, take no more than
10% of the risk. If you enter five trades a day, then, respectively, you should
divide 10% of risk by 5. Do not make frequent transactions, trying to earn more.
You will lose a lot of money by paying commission fees to the exchange.
30% of cash on the account is the minimum you should always have. You
should never own only cryptocurrency or only fiat money. Even when the
currency price falls, you should have some cryptocurrency assets. Respectively,
when the market grows, you should have fewer assets in Bitcoin and more assets
in Ether and altcoins. The larger capitalization of an asset, the less volatile it is.
Thus, if you want to have smaller volatility in the fall, keep some of the money
in Bitcoin. May it be 10-20% of all your funds, but you should not keep
everything in cash. If you have Bitcoin, you can buy altcoins for it as they are
often traded precisely for Bitcoin. At the same time, you should have at least
30% of cash, even when the market sees a super growth. You may need money
for a new interesting ICO, a new movement with some kind of altcoin, etc.
The reason for entry should be equal to the reason for exit. Whenever you
enter a trade, you should know when you will exit. You should have an exit plan
for any situation. All your plans should be clearly spelled out on paper, and you
should not retreat from them.
Diversification of marketplaces and assets. If you trade, you should do it on at
least two top exchanges. Do not take risks even if the newly opened exchange
seduces you with small fees or you are offered a bounty.
Do not make many trades and avoid gambling. Here you need to understand
how often you open the terminal and monitor the quotes. I recommend that you
look at the cryptocurrency movements not more frequently than once a day.
Choose the time of day when you feel comfortable to do this. For example, you
come home from work, pour a glass of red wine (or a cup of tea), and calmly sit
down to see what’s new in the cryptocurrency market. You do not need to follow
the market every ten minutes convulsively. Such nervous behavior will do good
neither for your health nor for your wallet.
Have your own opinion, and do not listen to the crowd. There is not a single
person in the world who will tell you for sure how much Bitcoin will cost
tomorrow or make other accurate forecasts. Therefore, if you hear very highprofile
forecasts in favor of a particular coin, this person is probably biased in
some way.
I once again remind you that nothing can be 100% certain. I suggest you always
being reasonably sceptical. Nobody knows what will happen in the future.
Remember this and see through the trick. If someone convinces you of
something, ask yourself why this man proves his point so fiercely. You can
listen to the opinion of other people, but you cannot invest being guided by their
Keep the stops in your head. As we said earlier, it makes no sense to use stop
orders in the cryptocurrency market as they may not work or work badly.
Therefore, always keep your stop (your exit point) in your head, or write it down
in a notebook. For example, I bought the Ether for $250, and I will close the
position at $200.
Risks. I am sure that you have clearly understood after reading this book that the
cryptocurrency market is very risky. But you will not make such profits
anywhere else. You cannot double or triple a sum in a day anywhere else.
Finally, I remind you that there are no guarantees in the cryptocurrency market.
If a person gives you a guarantee, this person is a liar. Be ready for this as such
situations are quite common in this market. The most cunning and bright-headed
people (creators of ICOs, experienced traders, and so on) compete in the
cryptocurrency market, and each of them pursues their own aims.

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