Role of Stop Loss in risk management


The crypto market is widely known for its volatile nature, which makes it both extremely captivating and yet challenging for traders. Due to constant price swings, seasoned traders had to come up with a number of strategies to adapt to such changes and profit as much as possible. 

Apart from strategies, market players are also getting quite familiar with the trade automation feature that RevenueBot offers. By using it, you facilitate the trading process greatly and multiply your potential profits. The combination of both the functionality of our trading bots and strategies allows you to achieve the highest possible return on your investment. 

So let’s talk about that in more detail.  

Spot trading

RevenueBot users learn how to adapt to price fluctuations in order to successfully spot trade. Setting the percentage price overlap, you determine by what percentage the grid order will be placed (in other words, grid orders will be placed with a distance equal to specified percentage). This approach is based on analyzing the max values of monthly fluctuations for the given coin price.

Here you can see the screenshot. It shows how exactly the user analyzes these fluctuations and sets the grid order according to the data.

You should not use a Stop Loss order when spot trading. Unlike futures trading, there is no risk of liquidation in the spot one, so you can always tolerate a possible drawdown or recreate a bot with the opposite algorithm and keep working.

Futures trading

For futures trading, RevenueBot users employ several strategies to mitigate risks and generate higher profits.

Large price overlap

The first strategy involves using a large price overlap (starting from 40%) and a 1:5 ratio of bot deposit to total futures account balance, respectively. Likewise, it is recommended not to use leverage greater than 10.

One order and a Stop Loss

The second strategy to consider is to set up bots for just one order with a small profit percentage and then immediately set a Stop Loss. By doing so, you can maximize the use of Stop Loss, since as soon as you generate a profit, the entire deposit is processed by the bot, which allows you to reap even more profit and thus compensate for losses in case of an unfavorable transaction opening.

Using indicators and Stop Loss

If you manage to find a decent trade entry indicator, you can score highly. Example: if you make four successful entries and fail one, setting the profit at 1% and the Stop Loss at 1%, you could end up with a 4% combined profit on five trades.

Stop Loss can also be used as a condition for closing a settlement when using TradingView-based strategies. Say, for a bot with the LONG algo, a signal to enter a trade means opening a position. When receiving a signal for the SHORT algo, the bot will close the trade, as the start of the opposite algorithm suggests a change in market direction.

Conclusion

The crypto space is full of exciting opportunities for traders, but it also requires high adaptability and a meticulous strategy. Applying different techniques for both spot and futures trading can help reduce potential risks and boost your profits. RevenueBot is intended to fulfill various trading ideas of both newcomers and experienced market participants. 

We hope that the strategies presented here will serve to guide you in the cryptoverse and assist you in achieving your financial goals. Feel free to visit our Knowledge Base for tons of useful information about RevenueBot. Any questions? Please reach out to our Support Portal – our team will be happy to address your issues. 

Good luck in trading! 

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