So we’ve given you the basics, given you ideas on how to set up to enter a trade, given you a whole plethora of trading strategies allowing you to explore charts with data. Now it’s time to think about managing your risk before, during and after you’ve entered a trade.

Part 3 - Managing Risk Trading

Crypto markets can be an awfully unforgiving place, if the wind blows against you you better know how to rotate that mast. 

As we’ve discussed in length, within part 2 of the series, having a trading plan before heading into a trade is crucial. It allows you to outline your risk tolerance and by this stage you should have found trading indicators that you feel comfortable and confident interpreting. It brings a sense of structure, which in turn instills discipline to achieve your trading and hopefully lifetime goals. 

Stop loss, stop loss. stop loss. I can’t stress enough that this cryptocurrency market is volatile, and prices can move quickly. Why lose your port in one trade, when there’s another trading opportunity around the corner. Limit your potential losses and know what you will lose if you’re on the wrong side of the trade.

That leads me on to the size of your trade. Start small when you're first starting out, it's a good idea to start small. This will allow you to learn how to trade without risking too much money. When you start to become more at ease with the markets, you may feel you can increase your size slowly.

Set aside a proportion of your total trading port each trade. This could range from 2%-10% depending on your risk tolerance and confidence in the trade you are about to enter. Bear in mind you’ll be using leverage, so your position to manage will be the equivalent of 20% - 100% using 10 times leverage your total trading port.

Don't trade with more than you can afford to lose. This is a golden rule of trading, and it's especially important in perpetual trading.

Hedging, which involves taking an offsetting position to reduce your overall risk. Hedging can be used to reduce your risk of loss if the price of the underlying asset moves against you. All i’ll say on this one, is it’s a powerful tool. I could write streams of information and ways of hedging, but I'll leave that for another day perhaps….

Now as well as the physical act of taking a trade, there’s the mental aspect too. Part 4 will be on the psyche of a trader. But it feels apt to touch on a couple of subjects before we close out.

Take breaks. It's important to take breaks from trading, especially if you're losing money. Touch grass, go outside, clear your mind and come back with a fresh perspective. Analyse your trades, be critical. It’s the only way you will learn for yourself.

Be patient. It takes time to be a consistent and profitable trader. The stats say that only 5% of traders are profitable. Strive to be part of the elite, you can do it!!

And finally, don't trade emotionally. It's important to trade with your head, not your heart. Don't let your emotions get the best of you, especially when the market is moving against you.

I feel that’s a nice circle back to the first point, prepare, use a trading plan. Set up for success. Whether that’s trading on behalf of other people through Perpy vaults or for your own financial gain.

Trade safe, trade smart and stay sane. Happy trading peeps. Until til next time folks peace out