In volatile markets, risk management is more important than returns. This comprehensive guide covers position sizing, stop losses, portfolio allocation, and psychological risk management for serious crypto investors.
Max Recommended
2-5%
Per Position
Max Crypto
10-30%
Portfolio Allocation
Stop Loss
15-20%
Recommended Range
Risk/Reward
1:2 Min
Minimum Ratio
The golden rule of investing. In crypto, where 50-90% drawdowns are common, you should only invest what you can afford to lose entirely.
Rule: If losing your entire crypto position wouldn't affect your lifestyle, you're investing the right amount.
How much to allocate to each position is crucial. 2-5% per positionis the professional standard for volatile assets.
Calculation: Position Size = Total Portfolio × (Risk % / Stop Loss %)
Example: $10K portfolio, 2% risk, 20% stop = $1,000 position size
Stop losses are non-negotiable in volatile markets. For crypto,15-20% trailing stops work well for core positions.
Tip: Use mental stops for long-term holds, but physical stops for any trading or altcoin positions.
Only enter positions where potential reward is at least 2x the risk. This means you can be wrong 50% of time and still be profitable.
Example: If you risk $1,000 on a trade, you should expect to make at least $2,000 if successful.
FOMO (Fear of Missing Out)
Fear of Losing
Overconfidence
Revenge Trading