Cleo.finance: How to avoid crippling losses when trading?

[savetheFORUM]

Great advice.

But the question would be, is that, do all traders could do some discipline to themselves and apply great approaches in trading to avoid crippling losses? That's where the challenge would start.

In this time of bear market, where a lot of red candles (lower highs and lower lows) a lot of traders are confused on what to do to gain back profits. Traders in futures especially, are eating up liquidation messages from binance every single day. The one mistake I've noticed is that they are contradicting the trend, meaning they are entering a long trade even though the market is in short trade, add up the insane leverage just to cope up with their losses which for me is something very risky.

Using a high leverage doesn't mean you could gain back the losses you've suffered on your last trade, I mean you could if your TA is good enough to back you up, but if you're not sure and just randomly entering a trade, it's suicide.

Of course not all of them because there are still traders that can get distracted easily and they then do the wrong moves but only those who are serious enough are going to apply the advice that is being talked about here. The market is becoming unpredictable the longer we go and that can be the cause of the confusion of traders. There's also a news that I read last time which states how traders are struggling now.

It sounds unbelievable at first because traders are usually the ones that can profit on this volatile market. That only shows that this bear is lethal that even the pro traders cant do anything to help themselves. Traders should calm down a bit and don't be desperate enough doing risky things as it only worsens the situation.

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[LUCKMCFLY]

I think that the most effective way to avoid very large losses is to follow our own plan, when we have a trading strategy and the market goes against us, sometimes we tend to get desperate, it is for this reason that it is very important to place the Stop Loss, the Stop Loss for me is a unique savior, also another thing is to get carried away by emotions, when a person gets carried away by their emotions they can lose, sometimes another thing that has harmed me is to follow advice from the news, to Sometimes the news is a double-edged sword, and according to some books they talk a lot about it.

[virasisog]

Crypto trading is a unique thing, the opportunity to rise by thousands of percent in a day can be obtained, instead we can lose 99% in a day or even less, as happened with Luna only takes a week to drop from $ 100 to $ 0,0001, and in my opinion things What we can do is determine the target profit and target loss, what I do is immediately sell when profit is 10% and immediately sell when a loss is 15%.

That is why crypto trading is a high-risk activity, because highly volatile price movements are difficult to predict. So make sure before deciding
to trade crypto we already have sufficient knowledge and can analyze market movements well. In order to avoid trading in the wrong coins,
and also be able to use effective strategies to generate profits.

It can be riskier if we don't have knowledge and skill about this and I suggest those who come and try trading must invest their time knowing the market first and have some mentor to assist. I'm not going to say we should have to keep this person forever, it is just the days when we are in the learning process. In this way, we are able to understand how that trading works and simply guide us to a better choice of coins to trade and the basis of it. It can't be simply ( a different view to others) and that is why we need to take this seriously otherwise.

Investing knowledge and understanding not just about the basics of trading but also about its risk is the first thing that we need to do. We should know how trading works so we could create our own target goal. Trading has lots of risks but if we're filled with knowledge about it, we can deal with all those risks and do trading effectively and successfully.

[Rigon]

Being a trader and trying to avoid losses is a phenomenon that is more than understandable, but very rare and difficult. Do not expect such a solution to the problem.

In order to be a trader, he must have a tendency to accept both profit and loss.If you want to trade, you must lose the profit. You just have to be more discriminating with the help you render toward other people.I have seen people lose more than the money they gain by trading.

[sklopan]

Only experience and choosing the right strategy. Otherwise, the results will be exactly those for which the trader works.

[Findingnemo]

When someone wants to be a trader and exist here for long term then its important to know their limits which is based on their financial level, financial goal and time availability for all these stuffs. Better avoid doing the day trading or even looking at the price chart for too long because it will create panic situation which can even leads to wrong decision. Better to use the stop loss all the time so it can save from the sudden dumps which happens on the market.

[wxa7115]

Crypto trading is a unique thing, the opportunity to rise by thousands of percent in a day can be obtained, instead we can lose 99% in a day or even less, as happened with Luna only takes a week to drop from $ 100 to $ 0,0001, and in my opinion things What we can do is determine the target profit and target loss, what I do is immediately sell when profit is 10% and immediately sell when a loss is 15%.

LUNA was one of the horrific incidents I've ever experienced, and indeed stop losing is very important,
but when we do it for real and sell at 10% or at -10% it will certainly be difficult to do,
because I believe 90% of traders are dissatisfied with that result and continue to hold until maybe 10x then they sell, and that's a fact that I see.

What happens is that when to comes to taking profits there are two different philosophies, there are those which determined beforehand how much profits they want to obtain out of each trade and there are those that will let their winners run.

Both strategies have merits, however the biggest risk comes from those which like to let their winners run, and this is because if a strong drop in the price happens then many traders will not be able to accept the smaller profits they are getting now and they will keep holding their coins with the hope there is a reversal in the market, and when that does not happen and the price keeps going down then that is when they can accumulate huge losses as they refuse to sell.

[Kelvinid]

When someone wants to be a trader and exist here for long term then its important to know their limits which is based on their financial level, financial goal and time availability for all these stuffs. Better avoid doing the day trading or even looking at the price chart for too long because it will create panic situation which can even leads to wrong decision. Better to use the stop loss all the time so it can save from the sudden dumps which happens on the market.

Stop loss is indeed important in trading but not in the case this time, we'd rather use the volatility of the market to buy and sell, and make a profit from it, not losses. Experienced traders might not seem to have a problem in bear season, it was those starters or beginners as I know the current situation is too risky. That is why I don't push people (beginners) to do trading but instead spend this time familiarizing the market behavior and making ready for the upcoming days when this is over.

[Findingnemo]

When someone wants to be a trader and exist here for long term then its important to know their limits which is based on their financial level, financial goal and time availability for all these stuffs. Better avoid doing the day trading or even looking at the price chart for too long because it will create panic situation which can even leads to wrong decision. Better to use the stop loss all the time so it can save from the sudden dumps which happens on the market.

Stop loss is indeed important in trading but not in the case this time, we'd rather use the volatility of the market to buy and sell, and make a profit from it, not losses. Experienced traders might not seem to have a problem in bear season, it was those starters or beginners as I know the current situation is too risky. That is why I don't push people (beginners) to do trading but instead spend this time familiarizing the market behavior and making ready for the upcoming days when this is over.

We are not in the sideways, its almost getting down further after a little green that is why its not really a good time for day trading but still someone can make profits but being consistent of doing it in the bad time is almost impossible in my personal experience so taking a break at this time and wait for the actual recovery to happen.

[abel1337]

When someone wants to be a trader and exist here for long term then its important to know their limits which is based on their financial level, financial goal and time availability for all these stuffs. Better avoid doing the day trading or even looking at the price chart for too long because it will create panic situation which can even leads to wrong decision. Better to use the stop loss all the time so it can save from the sudden dumps which happens on the market.

Stop loss is indeed important in trading but not in the case this time, we'd rather use the volatility of the market to buy and sell, and make a profit from it, not losses. Experienced traders might not seem to have a problem in bear season, it was those starters or beginners as I know the current situation is too risky. That is why I don't push people (beginners) to do trading but instead spend this time familiarizing the market behavior and making ready for the upcoming days when this is over.

Using volatility to recover losses is a way that traders do, Beginners also do this but I'm sure most of them fails because of market traps that wants unexperienced traders to be liquidated. It would be wise for new traders especially those who just entered crypto on bull market to study and familiarize the market cycle first. I do have a friend that earned big time on trading during the bull market but now he is on loss about 50- 60% of his portfolio. I told him not to be over confident in the market just because he gained so much profit during the bull run. Stop loss is a great way to prevent continued losses but over confident trader don't use it. Crypto market is just so unforgiving especially on those inexperienced once.

[BuNga_cute]

Crypto trading is a unique thing, the opportunity to rise by thousands of percent in a day can be obtained, instead we can lose 99% in a day or even less, as happened with Luna only takes a week to drop from $ 100 to $ 0,0001, and in my opinion things What we can do is determine the target profit and target loss, what I do is immediately sell when profit is 10% and immediately sell when a loss is 15%.

That is why crypto trading is a high-risk activity, because highly volatile price movements are difficult to predict. So make sure before deciding
to trade crypto we already have sufficient knowledge and can analyze market movements well. In order to avoid trading in the wrong coins,
and also be able to use effective strategies to generate profits.

It can be riskier if we don't have knowledge and skill about this and I suggest those who come and try trading must invest their time knowing the market first and have some mentor to assist. I'm not going to say we should have to keep this person forever, it is just the days when we are in the learning process. In this way, we are able to understand how that trading works and simply guide us to a better choice of coins to trade and the basis of it. It can't be simply ( a different view to others) and that is why we need to take this seriously otherwise.

It is true that mentors are needed to guide us so we don't make wrong decisions, because usually mentors are more experienced and can direct us
when trading. Most importantly we need to find a trusted mentor, because nowadays there are so many frauds, so we really have to be careful
in choosing a mentor. I suggest looking for a mentor from a trading course on a popular and trusted platform. Although the cost is quite high,
most importantly the mentor can be trusted and can make us understand how to trade properly.

After all, we will not always be guided by a mentor, if we already understand how to trade well, we will trade relying on our own trading skills.
Then because of the high trading risk we must really prepare a backup plan if the market does not move according to our expectations.
The conclusion is that it is not easy to be a successful trader, careful preparation is needed. So besides we must be serious in making preparations
before trading, we also sometimes have to sacrifice money and time to become a successful trader.

[fullhdpixel]

It is true that mentors are needed to guide us so we don't make wrong decisions, because usually mentors are more experienced and can direct us when trading. Most importantly we need to find a trusted mentor, because nowadays there are so many frauds, so we really have to be careful in choosing a mentor. I suggest looking for a mentor from a trading course on a popular and trusted platform. Although the cost is quite high, most importantly the mentor can be trusted and can make us understand how to trade properly.

Mentor and influencers are different things. If you know a person that helps you personally, and either do not help anyone else, or maybe a few other people with you and you chat with them and you ask questions and they answer and basically it is a friendly environment then it's fine and they are mentors.

But, if we are talking about some twitter influencers that talks about crypto, shows charts, indicators, whatever, and tells you what to buy, when to buy it, at what price, and when you should get out etc etc, then it is an influencer and it is not a person that should be trusted with it. Know the difference between a mentor and an influencer then you could find someone easier.

[_BlackStar]

Mentor and influencers are different things. If you know a person that helps you personally, and either do not help anyone else, or maybe a few other people with you and you chat with them and you ask questions and they answer and basically it is a friendly environment then it's fine and they are mentors.

A few days ago the price correction has weakened my mindset about how it should stay in a bearish prone area. So far trading is not one of my favorite activities, it may be profitable but I prefer investing to trading. It's just that my psychology was disturbed because the price fell to the point of $17.7K which is the lowest price at the moment and recover to $20K - $21K within days.

I learned a few things, and I've noticed them during the quick corrections. No need to worry too much about how bitcoin has a new pattern for its price, the low point is a guarantee that it might happen sooner or later, but the most important thing is to never think that it is the end of everything. So do you think an experience like this can't be a good mentor to anyone?

[xSkylarx]

~snip

People especially newbie ignore this stuff. Their goal is to have huge profit so they often tend to risk a huge percentage of their portfolio. They don't think about any risk and just think of the outcome if the market favors their side. They will just realize their mistake when their portfolio is more than 50% down.

Learning those strategies requires strong discipline to control their emotion which is the most important for me to avoid huge loss in trading. Even experts sometimes forget their trading strategy because of greed.

[wxa7115]

~snip

People especially newbie ignore this stuff. Their goal is to have huge profit so they often tend to risk a huge percentage of their portfolio. They don't think about any risk and just think of the outcome if the market favors their side. They will just realize their mistake when their portfolio is more than 50% down.

Learning those strategies requires strong discipline to control their emotion which is the most important for me to avoid huge loss in trading. Even experts sometimes forget their trading strategy because of greed.

Position size is incredibly important in order to determine if a trader will become successful or not, after all even if you had a strategy which could give you profits and you were completely sure about it as you backtested your strategy, all of that will be for nothing if your position size is too high.

This is because regardless of how good your system really is there is no system that wins all the time, so you also need to prepare yourself to endure several losses in a row, but if your position size is too high then you will lose a lot of money to the point it will be impossible to ever recover it no matter how long you trade.

[Genamant]

Hello everybody, here is an article about position sizing, and here is its quick summary(Full Article):

Position sizing is determining the correct size of the position based on the amount of money you risk on the particular trade.

Before you can do that, you need to figure out what is the maximum acceptable risk of the trade.

That risk is usually expressed as a % of your balance, that you are willing to lose.

To make sure you don’t lose more than this amount traders set a Stop Loss order which are the real maximum exposure of your position.

If you don’t use a stop loss, you are exposing your entire portfolio!


Where to put a stop loss?

• That’s where Technical Analysis can be handy. Majority of retail traders would look at the chart to find out – usually behind some support/resistance level or based on some volatility indicator, such as ATR

Rule of thumb:

Risk between 1-3% of your portfolio balance on each position. This way any single individual loss won’t wipe your account and break your spirit. And more importantly, even a string of losses will leave you with enough ammunition to recoup the losses.

Have a clear approach to risk:

• Set a risk limit for each trade, asset in general, day, week and month (you won’t risk more than X account)
• Determine the right position size and start small
• Increase the position size of trades slowly if your account grows
• Lower size or switch back to paper trading if your account doesn’t

Two types of position sizing methods: Fixed and flexible

Fixed position size

• Using the same position size for every trade
• Good for finding out if your strategy has an edge
• Make sure you come back and reevaluate position size periodically.

Flexible position size

• Using a percentage of current balance
• Cluster of wins makes every following win larger
• Cluster of losses makes every following loss smaller

How to calculate the correct position size:


You need to know

• Trading account size
• Acceptable risk (in % per each trade)
• Invalidation point (in form of a distance from the open price)

The formula:

Position size = Trading account size x Acceptable risk / Invalidation

Example:

• Trading account size = $10,000
• Acceptable risk = 1%
• Invalidation point = 4% drop in market price

Position size = $10,000 * 0,01 / 0,04 = $2,500

This way you will always risk losing $100 no matter where your Stop Loss goes! If Stop Loss must be wider, say 8%, the calculation is:

Position size = $10,000 * 0,01 / 0,08 = $1,250

Doubling the distance to our stop loss has us reducing our position size by half to maintain the same possible loss.

How to set position size in the trading platform

• Pick a leverage
• Add a Stop Loss
• Input the market price or the distance in % of the stop loss
  
  • Whichever value you enter first, that becomes the constant – element that won’t change when you edit other variables. You can select different constant by clicking the “target” icon
• Input the Position Size or Margin size while watching the PnL of the Stop Loss
  
  • Increase or decrease the size of the position, until the PnL of the Stop Loss is at the level you want it to be

This way you can control exactly what your exposure is, while understanding all the variables involved. You can even add multiple Stop Loss orders, which can help you limit the exposure in lower conviction plays, such as new set-ups.

The next article will be about Stop Losses.

All of these are basic knowledge a trader must know and must apply,
the real challenge is to keep the discipline attach and not greed to take over.

[RealMalatesta]

People especially newbie ignore this stuff. Their goal is to have huge profit so they often tend to risk a huge percentage of their portfolio. They don't think about any risk and just think of the outcome if the market favors their side. They will just realize their mistake when their portfolio is more than 50% down.

Learning those strategies requires strong discipline to control their emotion which is the most important for me to avoid huge loss in trading. Even experts sometimes forget their trading strategy because of greed.

That type of struck and "do not get out of your way for no reason" mindset is not an easy one, of course it is not impossible but it is not an easy one neither, that takes a while for most people and we should not be hoping for something like that anytime soon neither.

I believe that the best thing we could do is learning how to make mistakes, and learning why we made those mistakes and then trying to make those mistakes again. I know that it is not going to be a simple thing to just go out and make mistakes because it is our money we are talking about if we lose, but without that, we are going to just try to profit and involuntarily make mistakes which will be much worse.

[harapan]

When would be best suitable to carry out this tips,in other to avoid big losses, perhaps, losses are also signs and symptoms of trading.
Large amounts of cash will be spent of such tips and techniques as much I know do one can successfully get enough profits from it.
Best market for this would be in. ? Bear market! And also what worked for for might not work for another trader. Good article OP.

[kamvreto]

People especially newbie ignore this stuff. Their goal is to have huge profit so they often tend to risk a huge percentage of their portfolio. They don't think about any risk and just think of the outcome if the market favors their side. They will just realize their mistake when their portfolio is more than 50% down.

Learning those strategies requires strong discipline to control their emotion which is the most important for me to avoid huge loss in trading. Even experts sometimes forget their trading strategy because of greed.

That type of struck and "do not get out of your way for no reason" mindset is not an easy one, of course it is not impossible but it is not an easy one neither, that takes a while for most people and we should not be hoping for something like that anytime soon neither.

I believe that the best thing we could do is learning how to make mistakes, and learning why we made those mistakes and then trying to make those mistakes again. I know that it is not going to be a simple thing to just go out and make mistakes because it is our money we are talking about if we lose, but without that, we are going to just try to profit and involuntarily make mistakes which will be much worse.

mistakes in the past being the best teacher, an experience that should really make us able to avoid the same problem. It takes several tries to avoid the same problem, every trader has their own strategy, but what is certain is that avoiding losses is something that must be done. We also have to have control over the trades that are being made, lest the traders only get losses.

[thecryptogandalf]

Where to put a stop loss?

In my opinion, Setting a Stop Loss is one of the important elements moreover done by daily traders. This is done to avoid more losses and move to another trading pair again to gain more profits. So, the recent profits can cover the loss that we have in advance. But, if this is for long-term investment, especially for top coins like Bitcoin, we may not need to set a stop loss because we are not in immediate trades.

I agree with this one, definitely you have a point there. Overall long-term investing or any frequency of trading regardless of having stop loss, risk management matters I think. How you diversify your investment, what chart you are monitoring, fundamentals and technical analysis, your size, capital and money management are all related to risk management.

How to calculate the correct position size:

Will this really work on every trading strategy?

When I see the trading leverage use, well, this may be interesting more, because we can gain much more profits on it, but also high risks to face. That is why more calculations, strategies, and smart decisions to take the position will be very crucial to combine.

“When you combine ignorance and leverage, you get some pretty interesting results.” - Warren Buffett
To avoid the "interesting" result when trading with leverage;
-Always use stop loss
-Use take profit, don't be greedy
-Spot and stop overtrading
-Start Small and grow

This is how I try to minimize my high risk and capitalize on gains when using leverage.