Wassup folks! In today's vid I'm explaining a new topic - How to size your position (read: how to size risk per trade).
Necessary Indicators: Historical Volatility
Prerequisites:
1. Have a defined trade plan.
2. Know the outcome you're expecting.
3. Have a hypothesis on how long you plan to hold the trade.
4. *not mentioned, but obviously have a way to protect downside risk (stop loss, psychological cut off level)
Because Bitcoin is in a range, and also because the moves have been _somewhat_ easy to anticipate, I came to the conclusion utilizing previous price action that in order to make 10%, I'd probably have to hold this trade somewhere between 3-5 days.
After knowing my end goal, and time horizon, I then needed to know how much added risk (leverage) I needed in order to reach my goal in 4 days with the expected volatility.
Calculation:
Expected Gain/Expected Volatility = Leverage
10/23 = 0.43x Leverage
Keep in mind that past events cannot predict future outcomes. We can only use them as a guide to give us a probable outcome, nothing can truly be predicted.
This indicator something I've recently learned and thought it would be good to share, which also helps me understand it better by having to break it down to someone else.
I haven't used this indicator before to make trades, however I plan to test this hypothesis out and will update this idea thread on the results in 3-5 days.
If you have more insight on this indicator on how you use it or any tips, feel free to leave a comment below.
Necessary Indicators: Historical Volatility
Prerequisites:
1. Have a defined trade plan.
2. Know the outcome you're expecting.
3. Have a hypothesis on how long you plan to hold the trade.
4. *not mentioned, but obviously have a way to protect downside risk (stop loss, psychological cut off level)
Because Bitcoin is in a range, and also because the moves have been _somewhat_ easy to anticipate, I came to the conclusion utilizing previous price action that in order to make 10%, I'd probably have to hold this trade somewhere between 3-5 days.
After knowing my end goal, and time horizon, I then needed to know how much added risk (leverage) I needed in order to reach my goal in 4 days with the expected volatility.
Calculation:
Expected Gain/Expected Volatility = Leverage
10/23 = 0.43x Leverage
Keep in mind that past events cannot predict future outcomes. We can only use them as a guide to give us a probable outcome, nothing can truly be predicted.
This indicator something I've recently learned and thought it would be good to share, which also helps me understand it better by having to break it down to someone else.
I haven't used this indicator before to make trades, however I plan to test this hypothesis out and will update this idea thread on the results in 3-5 days.
If you have more insight on this indicator on how you use it or any tips, feel free to leave a comment below.
Note
In hindsight, I should've used something like 30% expected gain so the leverage could be increased. Same concept though!Note
Trade closed after a 6% drop and 0.43x leveravge giving us a 2.58% loss 
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.