Protect your capital before you think about profits
Only trade with money you can afford to lose completely. Crypto markets can drop 50–80% and stay there for months or years. This is not rare — it has happened multiple times. Never use borrowed money, emergency savings, or money you need for rent and food. If losing this money would hurt your life, do not trade with it.
Never put all your money in one trade. This is the most common mistake beginners make. Professional rule: risk no more than 1–2% of your total balance on a single trade. Example: You have $1,000. Your max risk per trade is $10–$20. This might feel small — but it means you can survive 50+ losing trades in a row without being wiped out.
A stop-loss is not optional. Here is what happens without one: Price drops 40%. You hope it recovers. It drops another 30%. You panic-sell at -60%. With a stop-loss: Price drops 5%, stop fires, you lose $15. You move on to the next trade. The difference is catastrophic vs manageable. Always set a stop-loss before entering any trade.
Before entering any trade, ask: how much can I lose vs how much can I gain? Minimum ratio is 1:2 — for every $1 you risk, you must have potential to gain at least $2. Example: Stop-loss is $50 below entry. Take-profit must be at least $100 above entry. If the numbers do not work out to at least 1:2, skip the trade. Over time, good R:R keeps you profitable even if you lose more trades than you win.
FOMO (Fear Of Missing Out) — buying because price is pumping fast and you fear missing the move. This usually means buying the top, right before the correction. Panic selling — selling when price drops hard because you cannot stand the loss. This usually means selling the bottom, right before the recovery. Revenge trading — doubling your position after a loss to "win it back." This usually means losing even more. The market does not owe you anything.
Your trading balance is $500. You follow the 2% rule. What is your maximum risk per trade?
Only trade with money you can afford to lose completely.
Crypto markets can drop 50–80% and stay there for months or years. This is not rare — it has happened multiple times. Never use borrowed money, emergency savings, or money you need for rent and food.
If losing this money would hurt your life, do not trade with it.