Trading is not about guessing the direction of the price, but about playing probabilities. The first thing everyone must learn: the market can go anywhere. Your task is to ensure that even a series of mistakes does not knock you out of the game.
1. Risk/Reward (RR) ratio
This is fundamental. RR is the ratio of the amount you risk to the profit you plan to make.
Gold standard: 1:3. This means that for every $1 at risk, you expect to make $3 in profit. With this approach, you only need 30% successful trades for your deposit to grow steadily (see the table).
2. Position Size (Position Sizing)
This is the most important number in your trading terminal. From the Square stream, I see that traders often 'go all in', but professionals calculate the entry volume from the stop-loss.
Formula calculation: Risk amount ($) / Distance to stop-loss (%) = Position volume
Example:
Your deposit: $1000.
Your risk per trade: 1% ($10).
You see the entry and understand that the logical stop-loss is 5% below the entry price.
Calculation: $10 / 0.05 = $200.
Conclusion: You enter a trade for $200. If the price drops by 5% and hits your stop, you will only lose $10 (1% of the deposit), not your entire capital.
Why is this important?
Most liquidations in crypto happen not because of a 'bad market', but due to incorrect position size. If you risk 10% on each trade, a series of 10 mistakes (which will happen to anyone sooner or later) will wipe you out. With a risk of 1%, you have a huge safety margin for analysis and correction of mistakes.
👉 Remember: First learn not to lose, and profit will come as a result of your discipline.
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