Position Sizing & Risk per Trade for Bitcoin Trading ✔️ (BTC/USD ALTs/BTC)
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- Опубликовано: 15 май 2024
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THIS IS NOT INVESTMENT ADVICE. I am not a financial advisor, videos in this channel are just for educational purposes.
Hello guys. In today's video, I will explain how to calculate your position size while trading bitcoin. If you are familiar with any kind of trading, you should know that position sizing is at least as important as your trading strategy.
After I tell you the logic of position sizing and how to calculate it, we will look at a couple of examples. So don’t worry, at the end of the video you will be able to calculate your position size no matter what.
In this video, I will show you how to calculate your position size step-by-step. Position sizing in bitcoin is not different from position sizing in forex-markets or the stock market. After this video, you will easily calculate your position size while trading both, Bitcoin and alt-coins.
There are 4 steps to follow while calculating position size
The first step of position sizing is to decide your total risk per trade. What does it mean? So let’s say that you have 10000 dollars in your account and you decided to risk no more than 2% per trade. That means your maximum loss per trade will be 200 dollars. Of course, some people might be willing to risk more than 2%. Also, some people can be more conservative and they would want to risk only 1% of their account size, per trade. So, the first step of position sizing is to decide your total risk per trade. For example, Let’s say that our account has 10000 dollars of balance, and our total risk is 2% of the account, which equals to 200 dollars.
The second step of position sizing is to decide your stop-loss. You should never take a trade without a stop-loss. Your stop loss point should be based on your technical analysis, regardless of your balance. What I mean is you should decide your stop- loss-point before opening a trade. And after that, you should decide on your position. You should never decide your trade- position-size before deciding your stop-loss point. With that
point of view, you will be more picky while taking a trade and you will lose fewer trades in the long run.
After deciding your stop-loss point, you should calculate your risk per one lot. You can calculate this risk by simply extracting your stop-loss-price from your entry-price. The number you get will be your risk per one Bitcoin.
The last step to find your position size is to, divide your total risk per trade, to risk per one bitcoin. The number you found is the number of bitcoins you should buy.
With using these 4 steps you can calculate your position size in every trade. You can also use an excel sheet as a position size calculator as I do.
Now let’s look at two examples of position sizing with a bitcoin to dollar pair and an alt-coin to bitcoin pair. We will start with the bitcoin to dollar chart.
Okay, let’s see the daily chart on Bitcoin to USDT pair. I will not spend time on technical analysis and open a hypothetical position. Again, I am repeating, it is not a real trade, because, in this video, I am not explaining a trading strategy or an indicator. Let’s say that you see support at 8600 levels. And you open a trade when stochastic RSI indicator gives you a buy-signal at around 8700. Let’s say that you set a target price at 10000 dollars and your stop loss is at 8100 dollars. In another video, we will discuss how to set take-profit and stop-loss prices. But in this video, I just used 2 random prices for this example.
Even if it is a hypothetical trade, we have a nice risk-reward ratio of 2.20.
Remember in our scenario, our maximum risk per trade was 200 dollars, with a balance of 10000 dollars, and 2% risk per trade. And in this trade, our risk for 1 bitcoin is 600 dollars. So if we divide 200, which is our maximum risk per trade, to 600, which is our risk per 1 bitcoin, we will find our right position size which is
1/3 of a bitcoin.
You can calculate your risk per trade by multiplying your total capital with your risk percentage.
And your risk for 1 bitcoin value will be calculated by extracting your stop-loss point from your entry price.
#bitcointrading #positionsizing #tradingpsychology
Position sizing tool is available on most exchanges, but how to execute this strategy. Where are the settings available for choosing the percentage risk on account?
On binance, etc?
Please help!
woww it has been 1 year 😅... so does it mean that the calculation same with how we calculated lot size in forex?
Great video thanks, I like your excel setup 3:54
what about if im using leverage. Do i just X it by amount of leverage being used?
Yes, just multiply it with the leverage.
Thanks a million for your invaluable content... it's just wonderful
Glad you enjoy it!
Sir, thanks for the video. Really helps. Can I have the formula on the excel on the "Right trade size"?
Yes, sure. It is (Risk per 1 unit)/(Risk per trade)
just to check that position size amount is the number you input into mt4?
Yes :)
Hello TJ, thank you for your video and information. Quick question, this same "formula" works for MT4 traders, trading Indices, Forex, Gold and Oil ???
All the best and stay safe and healthy !!!
Hello Youarto, it is the same logic for all of the instruments. If you understood how to calculate the position size on btc, you can apply it to anything. But I will create a video about other instruments soon.
@@TradingJournal1 Thank you very much !!!
Grateful for you ❤
so there is not just a section where you enter your % like on a standard tradingview trade. do we have to calculate it the long way each time we trade? argh!! seems exhausting haha
Hahah even if there is, it is better to know the logic behind it :)
it is actually in tradingview
The equation should have been Total risk per trade / Risk per 1 BTC right?
Yea, I was super confused by it too.
Please help, how is it that when i do the calculations, my position size is apparently higher than my total portfolio?
For example I want to buy $INJ at 34.9305 with a stop loss of 33.500 and i will risk 5% of my total portfolio (1000) so that is $50.
If I use the formula and minus 34.9305 entre price by stop loss 33.500 I get 1.43. Then if i divide my total risk which is 50 by 1.43 i get 34.96 INJ i should buy. That equals out to about 1225 if you round the numbers up. How am i supposed to buy 1225 worth of INJ with only 1k total portofolio. Someone please show me what im doing wrong.
How did you get 0.4 BTC in Litecoin/Bitcoin?
This is the best one
How to get an excel position size calculator
I am not neither :) try 4h instead but be sure that you backtest
thx
There is an error on slide at 2:11, should be 'Total risk per trade'/'Risk per 1BTC', numbers are correct thou
Does this formula work for trading ETH/USD as well?
Same logic with all crypto mate
Thank u 🙏✅
Welcome!
Hi, where can I get the spreadsheet
Hey, create one? It takes less than 2 minutes
thanks man
Cheers!
How about the trading fees?
Of course, you should consider them. Sorry for not putting it in the video. Most exchanges take 0.1%
@@TradingJournal1 particularly binance? How much are the fees?
Could you send me the excel sheet?
Send an e-mail to me and I will!
i prefer ai voice more than human
You explain to quik and you must consider that your audience are not every body tha same nationality even you said everything correct
Sorry mate, I will be more careful. Thanks for the warning!
THANKS ☝☝👆👆After watching so many RUclips tutorial videos about trading I was still losing.