“Know the enemy and know yourself; in a hundred battles you will never be in peril.”
© Sun Tzu
As we discussed in our previous article, this quote perfectly describes the best trading practices that strengthen your strategy and can help you increase the returns. So, wanna earn 20% instead of 2%? Then, here we go!
The first part of the quote – “know the enemy” – in trading means that we should precisely study the nature and laws of losses to secure the deposit and succeed in trading. So, won’t you like to wake up one day with a million dollars lost? We guess you won’t. Thus, check out how risk management secures your funds with the unlimited power of math. Even basic rules ensure that you won’t lose the deposit even with 100 losses in a row!
However, we need more than secure the deposit. We need long-term PROFITABILITY. Generally, it is a result of a well-rounded trading SYSTEM. So, let’s start a journey to the ways that increase your gains in trading! Here we already deal with the second part of the quote “know yourself”.
“Know yourself”
So, the second equally important part of the quote tells us to know ourselves to win. Surprised? Psychology and boring statistics of your trades are also a part of trading. The idea is that there won’t be any magic strategy that acts as a magic pill, no unified earning method. Everything is individual. Thus, to develop a risk management strategy that suits you, you need data about you. We mean LOTS of data. Working with the data is a real-life method that underlies trading success, in contrast to shitty signals or indices that are promoted so often, but in fact, act only as complementary elements of trading strategy.
The data you need is broken down into 3 major categories:
- Self-awareness (basic knowledge of your finance and personality),
- Experience (trading statistics, your observations),
- The results of deeper analysis (key performance metrics).
Here we go! In this article we’ll discuss the first category – self-awareness.
Firstly, some of the data you already have before you start trading (basics knowledge, personal data):
Use only affordable deposit: you’ll earn anyway
Firstly, think about your trading deposit. How much money will you operate with? Remember that the sum should be affordable. Seriously, you do not have to sell your house to get your trading capital. Start with less and buy a couple of houses later. Of course, it may be the best decision you ever made (like in this story), but common, let’s be realistic.
The idea is that in cryptocurrency trading the initial sum doesn’t matter. You can start earning with a deposit of $20, $200, $2000, gradually growing the gains. Thus, you have an opportunity to start with an affordable sum. What is also important to mention is that for beginners it’s even better to start trading with a relatively small deposit to establish an earning system and with the time increase the sums and, accordingly, earn more. This way, you will be sure of your trading system stability. Note that with any sum you’ll be able to earn a particular share of it – for example, 20% monthly. Let it consider a simple example.
Steven is a student and he can afford only $100 to be a trading deposit. He develops a trading strategy. Being a talented trader, he already earns 10% weekly. These 10% accounts for $10.
But Steven grows up. Now he’s not a student anymore and he already can afford a trading deposit of $10,000. In this case, he already has a trading system that is tested and enables him to earn 10% (or even more!). Thus, he’ll get $1,000 as a weekly gain. The percentage (gain) stays the same – 10%, and Steve has earnings in any case, be it a deposit of $100, or $1,000. So, it’s possible to earn with any initial sum! Moreover, Steve has a proven earning system. And, obviously, it’s less painful to test the system with a small deposit.
So, choose the deposit you can afford and start earning. You’ll increase it for sure! Small earnings are likely to convert into huge ones!
Time vs Gains: Choose the right strategy!
Secondly, answer the question: What gains are you expecting to get & in what time? Depending on this, you will choose a trading strategy: for example, trend trading, swing, counter-trend, scalping. They all are profitable and fit various types of traders. To illustrate, in trend trading you won’t spend much time on trading, but as this strategy is long-term, you’ll have to wait before getting the profits. At the same time, if you are a scalper, you can get profits hourly even with a tiny deposit. Check out what’s yours!
Smart reinvesting: multiply gains with ease
Besides, talking about profits, remember one simple rule. Reinvest your profits to multiply your deposit swiffer. So, by increasing your trading deposit with your profits you grow your future gains. How it works? Simple math. Review an example:
Steven had a deposit of $1,000 (let’s name it x). On the first day, he managed to earn 50% from the initial deposit ($500) and added it to his trading deposit. So, now Steven is 1.5 times richer: he has $1,500 that is 1.5 x. Note that the next time his gain of 50% will result in a greater sum! Thus, the profit on day 3 equals $750 that is already 2.25 times bigger than the initial x-sum. That’s it, being rich is easier than it may seem to be!
Therefore, remember to figure out your opportunities and necessities before you start trading, choose a strategy that fits particularly you and do simple math to succeed in trading! Reinvest and enjoy the inflow of profits.
These basics will serve as a fundament for your further strategy. It’s notably easier to grow your deposit with the clearly defined goals and working conditions. By the way, this info often underlies a trading plan that leads traders to success step-by-step. It’s a system, remember?
However, the system is not that simple. To achieve indeed outstanding results in trading, it’s necessary to conduct more work. In our next article, we’ll review how to analyze trading stats in a way to increase profitability. So, let’s achieve trading goals!
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