Risk and Money Management in Crypto: Bybit Engage

Last week saw the beginning of our Bybit Engage topic discussions in our Bybit Ambassadors Telegram group. Serhii, our Bybit Ambassador from Ukraine, shared his top tips for risk and money management in crypto trading.

1. FOMO (Fear Of Missing Out) Won’t Beat You If You Have a Plan

Looking for trading patterns is a good way to decide when to buy or sell — for example, a triangle trading pattern.

We can wait for a breakout of the triangle (at the bottom or at the top)

We can create two Conditional Orders in such a situation. Let’s say the price of ETH is $286, for example. The first we can set up is a Buy Stop order at — say, $289. On the second we can set up a Sell Stop Order at — say, $283. If the price goes lower, we have an open short position at $283 and the first order will be closed. For the open short position, we can set up a Stop Loss and Take Profit.

In the opposite scenario, if the price goes higher than $289, we can buy the first order, setting up Stop Loss and Take Profit, while the second order will be closed. This is an actual plan, and planning ahead will bring you more success in trading than FOMO ever will, however appealing it may initially seem to make emotional decisions.

2. Stop Loss

Although Stop Loss can indeed prevent liquidation, please be aware that the Mark Price determines the Liquidation Price. Therefore, there may be a case where the Mark Price reaches the Liquidation Price before the Last Traded Price reaches the Stop Loss price. So, it is advisable to keep tracks on the market if you think there is a risk of this happening, so you can sell (go long) if necessary before this happens.

3. Calculating The Potential Risk Against Potential Profit

RISK/PROFIT = (Take Profit — Buy position) / (Buy position — Stop Loss)

If the potential profit is less than 2 times the risk — i.e. the answer is less than 2, then think very carefully about doing this trade.

For example you buy BTC at $10,000 and set a Take Profit at $12,000 and a Stop Loss at $9,000:

(12,000–10,000) / (10,000–9,0000) = 2 — so this could be seen as a worthy trade according to this formula.

4. Money Management

For example, if your trading capital is $10,000…

If you buy ETH at $185, this is 1.85% of your trading capital.

5. Keep 30% of Your Trading Capital in Stable Coins

6. Don’t Bet Against the Trend

The above chart illustrates the price movements of a market through Elliott’s Wave Theory. So, if you didn’t buy on the first wave, you can buy on the second wave, if you didn’t buy on the third wave, you can buy on the fourth wave.

On the flip side, when you see bearish signals — do not buy. Wait for a correction and sell.

Also, we can switch to 1H-4H timeframes and see some levels, if we are trading during the day, which prices cannot pass (resistance levels, indicated by the red lines on the below chart) and so is a good time to sell, or where prices bounce back from (support levels, indicated by the green lines on the below chart) and so is a good time to buy.

On a longer time frame, when BTC hit $3000 in late 2018, there were clear support levels and that could certainly could have been seen as a good to buy. Alternatively, when all-time highs were hit of $20,000 in late 2017, there we clear resistance levels and that could have been as a good time to sell.

7. Only Invest What You Can Afford to Lose

8. Sleep Well

9. Use Bybit!

One of The World’s Fastest Growing Cryptocurrency Trading Platforms