The Most Important Thing In Trading Bitcoin, Gold & Forex DerivativesKehinde LAWAL
Hey, Dear Loyal Reader,
I’m sure you opened this post to learn more about trading Bitcoin, Gold and Forex derivatives available in the financial market, and that’s exactly what I will be covering in this series of articles called Trading Basics.
If you like the truth and you’re open minded, then we’re good to go. Otherwise, you can as well move to another post on our website. I’m not just going to be sharing any niceties like it easy or you can become a millionaire trading Bitcoin/forex within a year. It’s just so much more than that.
So let’s dive in.
You see, the most important thing in trading is called “Capital Protection,” and this is because without capital you can’t place any trade.
It is one of the major things that separate Successful Traders from Unsuccessful traders.
Successful traders start from how much can they afford to loose if the trade goes against what they expected.
On the other hand, unsuccessful traders start with how much they want to make on the trade, thus forcing their wishes onto the market. This is wrong because the market doesn’t know you or anyone, and it can continue to behave irrational (not as expected) for long.
The professional and successful traders knows nothing is certain in the global financial market, thus they reduce their risk.
Professionals decide the amount they risk on a single trade based on the probability of that trade becoming a wining trade. And as a beginner, we are advised to stick to risking between 1% to 3% of our trading capital per trade.
When we become advance traders, we may then increase a few position to up to 10% of our entire capital depending on the probability of that trade becoming a wining trade.
Forget about how much you can make. You can’t force your mind or thinking or money on the market. It does not know you. You can only decide the probability of the trade becoming a wining trade based on proper evaluation.
If you want to try margin trading with as little as $10, you can try PrimeXBT.
Trading on PrimeXBT
PrimeXBT is a margin trading platform that enables you to trade with 100x your capital(100x Leverage).
So $10 starting capital can enable you place a trade with a margin of 100 x $10 = $1000.
You’re able to place larger trade with little capital because you’re borrowing money to trade which you pay interest on an hourly rate while using your initial capital as collateral.
If prices move against you to much, it will get to a stage that your trade will be liquidated with your collateral used to settle the loan.
So to avoid liquidation you should make sure you reduce the amount of the asset you’re trading and also your risk capital to 1% of your capital.
How do you calculate your risk capital?
Your risk capital is what will determine your Stop Loss.
If you have $10, you can risk 1% of your $10 on each trade. That’s $0.1
But I have realised that since our capital is small($10), using 1% of it($0.1) as risk capital puts our stop loss too close to our entry price very close, thus stopping our trade quickly.
Hence we can use 10% of our $10 which is $1 as risk capital. It does still leave some more space between our entry price and stop loss price.
Note: Using 10% position size on $10 trading capital($1 risk capital) allows us to place up to 10 loosing trades before we loose our entire trading capital.
So hopefully we won’t have 10 loosing trades if we’ve patience and stick to our strategy.
Also since PrimeXBT is denominated in Bitcoin, you will need to convert the $1 risk capital into Bitcoin and insert it under stop loss/project loss when placing the trade.
That’s $1/$8800 (current price of Bitcoin)
= 0.0001136 BTC
I hope you get the logic.
Pls feel free to ask questions.
Thank you .