How To Calculate Risk/Reward To Trade & Invest In Crypto MarketHi everyone:
Today I want to make this educational video on how to calculate your risk/reward in trading and investing in the cryptocurrency market.
Many newcomers in the industry are not aware of the importance of risk management. So today let's give out different examples of them on how to properly calculate the $, %, and setting the SL/TP.
This video is intended to help traders and investors to understand how to calculate the amount to risk per trade, or per investment purpose.
I will give different examples of going long and short in trading, as well as buying coins for the purpose of investment.
Doesn't matter what crypto broker exchange you use, this calculation/formula will work, you will just need to do some simple math to get to the right numbers.
Example 1:
Want to go long on BTC in a trade
Scenario:
Trading Account $12,000
Risk 1% of your trading account
Want to go long on BTC when price hits $70,000
You want the Stop Loss @$66,000,
and a TP @ $80,000
Calculation:
Calculate your 1% of the trading account:
$12,000 Account x 0.01 $120 per trade
Divide the $ you willing to risk to the SL amount
$120 / $4000 = 0.03
Set your entry order or market order
for 0.03 BTC @ $70,000 price
0.03 x $70,000 = $2,100
(This is the amount you will need in your trading account
to execute this position.
If you have leverage then its less $ needed)
Set your SL at $66,000
If price hits your SL, your order would be
0.03 BTC x $66,000 = $1,980
$2,100 - 1,980 = $120 = 1% of your account
Set your TP at $80,000
If price hits your TP, your order would be
0.03 BTC x $80,000 = $2,400
$2,400 - $2,100 = $300 = 2.5% of your account
Example 2:
Want to go long on ADA in a trade
Scenario:
Trading Account $800
Risk 1% of your trading account
Want to go long on ADA when price hits $2.30
You want the Stop Loss @1.70
Calculation:
Calculate your 1% of the trading account:
$800 Account x 0.01 = $8 per trade
Divide the $ you willing to risk to the SL
$8 / $0.60 = 13.34
Set your entry order or market order
for 13.34 ADA @ 2.30 price
13.34 x 2.30 = $30.68
(This is the amount you will need in your trading account
to execute this position.
If you have leverage then its less $ needed)
Set your SL at $1.70
If price hits your SL, your order would be
13.34 ADA x $1.70 = $22.68
$30.68 - $22.68 = $8 = 1% of your account
Set your TP at $4.00
If price hits your TP, your order would be
13.34 ADA x $4.00 = $53.36
$53.36 - $30.68 = $22.68 = 2.83% of your account
Example 3:
Want to go short on TRX in a trade
Scenario:
Trading Account $54,000
Risk 1.5% of your trading account
Want to go short on TRX when price hits $0.11
You want the Stop Loss @ $0.13
Calculation:
Calculate your 1.5% of the trading account:
$54,000 Account x 0.0150 = $810 per trade
Divide the $ you willing to risk to the SL
$810 / $0.02 = 40,500
Set your entry order or market order
for 40,500 TRX @ 0.11 price
40,500 x 0.11 = $4,455
(This is the amount you will need in your trading account
to execute this position.
If you have leverage then its less $ needed)
Set your SL at $0.13
If price hits your SL, your order would be
40,500 TRX x $0.13 = 5,265
$5265 - $4455 = $810 = 1.5% of your account
Set your TP at $0.07
If price hits your TP, your order would be
40,500 TRX x $0.07 = $2,835
$4,455 - $2,835 = $1,620 = 2% of your account
Example 4:
Want to buy ETH to hold for long term as investment
Scenario:
Investing Account $20,000
Risk 10% of your investing account
Want to buy ETH to hold for long terms
Want to enter when price hits $4,900
Calculation:
Calculate your 10% of the investing account:
$20,000 Account x 0.10 = $2,000 per investment
Divide the $ you willing to risk to the price you want to enter
$2,000 / $4,900 = 0.4082
Set your entry order or market order
for 0.4082 ETH @ $4,900 price
0.4082 x $4,900 = $2000
(This is the amount you will need in your investing account
to execute this buy.)
You want to lose no more than 25% of your original $2,000 investment.
$2,000 x 0.75 = $1,500
$1,500 / 0.4082 = $3,674.67
Set your alert and SL at $3,674.67
If price hits your alert/SL, your order would be
0.4082 ETH x $3,674.679 = $1500
$2,000 - $1500 = $500 = 25% of $2,000
You want to gain about 50% of your original investment before selling.
$2,000 x 1.50 = $3,000
$3,000 / 0.4082 = $7,349.34
Set your alert and TP at $7,349.34
If price hits your TP, your order would be
0.4082 ETH x $7,349.34 = 3,000.00
$3,000 - $2,000 = $1,000 = 50% of $2,000
Example 5:
Want to buy MATIC to hold for long term as investment
Scenario:
Investing Account $1,500
Risk 20% of your investing account
Want to buy MATIC to hold for long terms
Want to enter when price hits $2.25
Calculation:
Calculate your 20% of the investing account:
$1,500 Account x 0.20 = $300 per investment
Divide the $ you willing to risk to the price you want to enter
$300 / $2.25 = 133.34 MATIC
Set your entry order or market order
for 133.34 MATIC @ $2.25 price
133.34 x $2.25 = $300
(This is the amount you will need in your investing account
to execute this buy.)
You want to lose no more than 50% of your original $300 investment.
$300 x 0.50 = $150
$150 / 133.34 = $1.1249
Set your alert and SL at $1.1249
If price hits your alert/SL, your order would be
133.34 MATIC x $1.1249 = $149.99
$300 - $149.99 = $150.01 = 50% of $300
You want to gain about 75% of your original investment before selling.
$300 x 1.75 = $525
$525/133.34 = $3.9373
Set your alert and TP at $3.9373
If price hits your TP, your order would be
133.34 MATIC x $3.9373 = $525
525 - $300 = $225 = 75% of $300
Any questions, comments and feedback welcome to let me know.
If you like more of these contents, like, subscribe/follow and comment for me to keep doing them. :)
Jojo
