Bitcoin Forum

While browsing investopedia, I read about  2% rule where you will limit your loss to only 2% of your total capital. 

Will this be applicable to crypto market? I always believe that you should wait for stock/crypto to gain atleast 20% to lock the profit but the 2% rule seems interesting.

Any insight? Anyone using this strategy?

the 2% rule means you don't risk more than 2% of your account on any one trade. if you have $100k, you don't risk more than $2k at a time. it's definitely applicable to crypto. it's a basic risk management strategy that hedges against variance.

even if your trading system is profitable, you could have a run of bad trades. if you trade 20% of your account at a time, you could blow up your account and lose your shirt after only a handful of trades. the 2% rule allows you to survive an unlucky run, and live to trade another day.

the opposite approach is the "all in on every trade" method that's so popular with crypto traders. :)

How can it work when earning only 2%? how about fees? or in 2% you already clear up all fees involve in trading and it's 2% gross earning/loss per trading


I'm sometimes guilty on this with some altcoins. I just set limit, all in and boom. goodbye. next altcoins to trade please.

Should be 2% with all the fees on top. If I may add, this strategy is not that aggressive but its not for everyone to apply as well. But one upside of this method is that you will be left with enough capital to stay in the game and live another day. There is also a lot of online trading calculators around, you might want to 'simulate' things first before you go on the actual trade floor.

Do you mean 2% for stop loss ? With high volatilitas of crypto, i think that too small percentace in crypto trading, for the better use minimum 3% to 5% for stop loss and take profit minimum 10%. Stop loss 2% can be better to use in stocks trading that has lower volatility than crypto.

It's about position sizing, not take-profit levels. You can take a position worth 2% of your account, then sell at 20% or 200% profit. These are two separate concepts. The 2% rule just limits the amount of capital you can put into a single trade. It doesn't limit how much profit you can make on that trade.

The old guideline still applies: cut your losers early and let your winners run.


Stop loss is also a separate (but related) concept.

2% can work. It all depends on the risk vs. reward and your trading style. I trade higher time frames (1-day, 1-week charts) which means I have wide stops, usually wider than 2%.

Yes it is applicable and no one is stopping anyone to use that strategy. You can even increase it more since in Crypto, there are times when the price will dip up to 10% then it will start to recover again and continue to go up, so 2% maybe a bit to small as an allowance in-case the market dips. I would set stop loss at 5% or 8%.

You are getting yourself confused, it is not about earning 2% on each trade, it is about not entering a position with more than 2% of the total capital you have. I believe that should be explanatory enough for anyone. This would always make it easy for you to make trades without having to worry about how much impact it would have on your general holding as the case may be.
It is a form of risk management or money management, however you want to see it. If you go all in on a single trade, you set yourself on a higher risk and even when other opportunities arrive to make other trades in some other potential markets, you become incapacitated to get in.

The 2% rule is pointless for long term crypto traders and HODLers.The bitcoin price always moves up and down with +/-5% every day.What if a trader just buys some bitcoins and activates auto stop loss order at 2%?I'm pretty sure that the order will be executed after minutes and after that ,the bitcoin price might go up with 10%,which means that he sold automatically at a 2% loss and now he has to manually buy btc at a higher price.

The 2% rule here just pertains to limiting the maximum lost one can get when trading a pair. It is done by investing only 2% of the capital of the trader but all in all, it is not that different to normal trading thus, it is not pointless for long term crypto traders and holders. In fact, it might be beneficial since they can pick many altcoins that have potential to grow in the future(which means more potential profit).

I would say that stop loss is applicable to crypto but the amount of % that we are applying towards the stop loss totally depends on how much we are risking or how much we can afford to loose. It is well known to everybody that how volatile the crypto market is and within a short duration large fluctuations take place. 2% might just seem a little low and since many coins fluctuate at a higher level on a daily basis. Keeping such a lower value might end up eating your profits as well. For example: the coin went down by 5% resulting in executing your stop loss order and then the price goes up by 10% . You just lost an opportunity of making 5% gains on your investment.
I would recommend keeping the % value at about 5% - 7% .

It is applicable, but only with scale. At first i was investing like a couple hundred bucks, so my trades involved a lot more % of the overall crypto stake.

It is very popular risk management strategy. Obviously it is applicable to cryptocurrency also.
By this method you can minimise your risk and make good profit in trading.But if you hold a long term valuable potential coin then it might not apply to it.

you mean if you have $2000, you will only trade $40 each day stock? okay, that makes sense.


I'm also thinking this but for me acceptable gain is 20% . I'm more of swing trader /long term holder. I try to catch crypto at low price and only start to sell when I see that it's on 20% gain but the rule of 2% makes sense though I think this is more applicable for day trader.


Yes, base on the above explanation I think this is how it works.

2% rule is applied for traders who do not want to take much risk which is a good plan in trading but at the same time rewards will be less, if you want to keep SL at the lower leven then your position should be lesser if you take big position then 2% risk can be covered at a  nearby price which may easily be hit, for lower position you profit will also be less.

Great analysis mate! That made me realized that this the 2% rule is very effective and made me shake my head while smiling. I also do the math with my funds I trade at Binance and this thread enlightens me what is missing and why I lost a huge amount already. If I just use this strategy from the beginning, I may save some of those money I lost and minimize my greediness or maybe poor analysis.


I will try to use this method next time and will always keep this in mind. Thank you so much for sharing this! I just found the article and saved already on my bookmarks.

https://www.investopedia.com/terms/t/two-percent-rule.asp

The 2% is a good trading tricks i will say. Even the popular trading platform will not only advice on risk management but also caution you to invest 1% while trading. The best is always "invest fund you can lose" to avoid heartache.

and this is what I apply when trading, taking profit not more than 1-2% in a day
because what we face are various kinds of risks, kerugia, losing a lot of time and other things

First of all I would like to say about stocks and crypto wont really be the same thing since both fields do really have different volatility when it comes to their prices. 2% rule would be good in using it up either on forex or stocks but those kind of stop losses wont really work anytime here on crypto yet price can swing into higher percentage which would really trigger that SL so easily.Even on having 10% would still be on danger.

If the exchanger have stop loss limit, that strategy might be can applied. But if don't we wouldn't have time to only stay to look market or maybe some pump and dump happen instantly.

The 2% rule is basically a money management strategy not to order a particular trade that will see our accounts in red whether big or small account.


Yes but sometimes we really should not feel bad when the stop-loss is logged out. What would have happened to our account if the SL was not there?

Any strategy can be use, just set a target before selling. Unlike in stock, crypto is very volatile and  you can  gain not only 2% but up to 200% as I have said, it would depend in your target selling.

We as people, have different financial goals and experiencing different situations.
Some are looking for high risks, the others for stability.

Any plan - is a plan, it is not the right place to get a financial advise neither.
It all depends on you and your status. If you are looking to build long-term wealth or speculating on short-term earning.

In my personal opinion, the 2% rule is applied more for traditional markets, when volatility is low.

You've chosen to adopt a young technology, that it is still developed.
It is like your 5 years old son is making a mess and painting the walls, and you are willing to send him directly to a psycho-treatment.
Don't cut the wings so fast, maybe it will be an art  ;)

Well it depends on yourself, it can be a good strategy to put a 2% stop lost, for me it's not too suitable,the reason is because crypto got a high volatility the 2% of lost can be easily happen and the bounce back again,it maybe a good strategy for stock but for crypto maybe the stop lost is too near

2% is a realistic number to achieve. it does not make us greedy, and still have regular psychology. Every trader has a different trading style, so self discipline is the key to success

;D I can imagine a lot of people may have been in this scenario before getting to learn it is not always the right thing to do. I must say the rate at which people tend to want to look for quick means of earning always make them to always want to go all in on some potential trade.

2% is a normal rule and you can go above that depending on the level of risk you want to take yourself, but usually I tell people that even if you want to take so much risk, do not go more than 5% of your total capital on a single trade as that is high on its own.

Earning is a total different game and you are always going to have to set your own profit level based on certain things you are looking at in the market and that also depends on your pattern of trading as for instance, most day traders, making 2% on a specific trade can be good enough for them.

targeting 2% profit is actually easy to practice because indeed for now we can follow the many suggestions that are here as a preference for us to trade

2% rule can be used in transactions cryptocurrency, It is a capital management method that helps us control the risk when trading.
The problem is that we must apply disciplined and flexible with all the methods that we know

Same with my understanding and personal experience, 2% can be happen in a blink of an eye inside crypto market, you loses right away and bouncing back much stronger won't let you recover but gained regrets, I guess there's a strict needs of practices before we can stick with any strategy that we have
read, experience will allow us to be more flexible and always ready to change pace whenever things is not working according to our plans.

2% is definitely a fair stop loss I would say, but in the world of crypto, you can expect to sell out on your stop loss very frequently, as 2% movement in a day is almost guaranteed, unlike the world of forex. When times are particularly haphazard you might want to increase this to 5% as +/- 5% in a day really isn't that unusual, especially for smaller volume coins.

I think that this rule is more applicable to forex. However, in the market of cryptocurrencies, you can apply this rule by slightly changing it. For example, as a rule, I open a position for an amount not exceeding 5% of the total amount of the deposit and set the stop loss not more than 10% of the open position.

If the percentage of the investment will be give less risk? How do you find the analysis in such way. If the investment amount is more than 30k in 2 percentage means will it be work correct.
However the lose is lose guys.

I do not think this strategy will work for long term and sometimes it goes correct.

It does depend on the type of coin you plan to trade as well, but why not just have a more flexible range that you adjust based on the coin and the market situation? It grants you way more freedom to ride out waves.

Crypto forces you to be flexible, otherwise you'll be working against the market, and believe me, people burn themselves doing that. That being said, pot stocks are just as volatile in the more recent months.

It's insane how even the security triggers halting trading can't prevent the market to adjust itself to the craze happening there, which clearly points out that there is a lot hype related retail money involved there.

Imagine how many shorters have rekt themselves by shorting pot stocks during their prime days.

This is the difference on crypto which price can swing up into higher percentages which means 2% would really be easy to attain and if you do make use of that 2% rule then expect it would really be possibly can be hit anytime. 2% gains or loss can be easily achieved and this is the best thing about crypto where reward can really be more than into those traditional markets but come to think that risk is also doubled too and if you do plan to engage yourself into trade then you should be fully aware on this thing.

The 2% rule for large investments is a huge loss. This rule can only apply to small or not large amounts. Placing a low target with injuries will help reduce losses, but setting too high a target with profit will make the long-term migration time riskier.

They may have written as a recommendation, not as a rule. This rule should belong to the cryptocurrency. People who have no knowledge begin to trade without calculating the volatility and have no good results.

Yes, this can be applied for crypto trading. There is some misunderstanding of the rule, usually. If you buy a coin without a stop loss (which is OK), then you risk 2%. If you open a position for 20% of your deposit and put a stop loss order on 10% this is the same rule. This doesn't mean that you use 2% of your capital, this means that you don't lose more than 2% on a trade

 Little pig eats a lot, big pig gets eaten. This statement tells you the story of profits from our perspective. To be a profitable trader, you never fall for the hype or try to hit a homerun with one trade. You look for the small profits that will compound as you reinvest them.Even small profit like 1% daily (I get it, this is unreasonably high, but for crypto - 1% daily is very much achievable if your portfolio is diversified within the top few coins) can help you accumulate significant profits over months.

Consistently making 1% daily, that is impossible, like I said, on some days you are better off just holding. But the next week when one of your coins get a 10-20% bump up, you'd have made up for the "boring" days.

2% trading strategy is not about stop loss, but a way to manage your funds when trading.

As long as you are trading a market and you want to enter a position, it is a normal way of saying you should not use more than 2% of the total amount you have to go in on that trade. That is one thing a lot of people always fail to do anyway and they either go all in, or just do whatever they please when going in on the trade which makes the outcome horrific at times, when things should not go in their favor.

With respect to stop loss, as long as you are not having a higher loss to lower profit ratio, then you are good, so in that case, you always set your own risk when it comes to stopping loss.

limit losses to only 2% I think it's very difficult, it's done only for professional traders. for beginner traders it might be possible to be at a price at the top point, so I think losses can be determined if you look at real market conditions.

Not possible if you do it seriously and wanting to have it. Even new adopters can made it provided that they have to focus on their trades and look best opportunity as they can to achieve such goal.  It is our own determination and perseverance to drive for the success.

yeah, this Cryptocurrency trading strategy is very feasible to try, the 2% profit per day is already normal rather than having to wait 20% to get an uncertain profit, but depending on whether the trader wants to use this strategy or not,

OP doesn't mean 2% profit but 2% of his total capital that he would be trading at a time. It is a good strategy because your emotions would not be that compromise if you see that the trade doesn't go your way. Besides that, you can buy more because you are left with 98% of your capital so you can buy on the way down and then be able to profit when the price goes up.

However, this strategy is only ideal if you have big capital because if you have a small one then 2% might be too small that it is even lesser than the withdrawal fee. You should find your own strategy then which would be fitting to your capital.

I think " hold "  and gain 20% is for people who use investment strategy not trading, specially day trading. Wrong rules can make you loss so please think again to set your stop loss and take profit point. You can use any gain ( % ) in your setting but I afraid must fit with your strategy. I believe 2% is possible for daily trading but in down trend investment strategy is more helpful.

It is a method I previously used for my foreign exchange investments, but I cannot say that I use too much in the cryptocurrency sector. As there is more volatility in the cryptocurrency sector compared to other investment instruments, the rate of 2% will be quite low, which may be true investments. However, as I have stated, I think that this ratio should be used more in this sector since this ratio is quite insufficient both in terms of profit margin and loss. This ratio should be determined by the investor completely and should not be too high due to the high risk of the sector.

For the cutloss target it is very efficient but the profit target for 2% is very small. And it's 20%-30% is very efficient for profit. The target is very must for trading that is just so not get loss very deeply

yes sir right, can you give me a minimum capital advice for this type of Cryptocurrency trading strategy, after that I will look for strategies that match the capital that I have now

Yeah actually it doesn't have to be a 2% limit, you're right every trader can develop their own strategy, according to their financial capabilities, of course it's impossible for you to use a 2% limit if your capital is small right? then formulate a strategy depending on yourself..

i think that if 2% is a daily target, that is big enough. but if the trader is enough with 2% profit for 1 month, of course it is a safe trade. where it is not hard to reach target

I think 2% limit is safe to cut losses in investment, but you can not always wait to see 2% and cut losses. This will make you tired when you have to sit on the computer 24/24 and can not place orders correctly.

Risk management depends upon when will you expect to exit. If you have risk management, you will look for risk of ruin over than taking of profits. If you can see that your risk is greater than your profit then do not buy the specific coin unless you will see a momentum trade.
2% rule is somehow a guidance for us that our biased did not materialize. Therefore, if we are lose at 2% in our portfolio then we cut it fastly.