How to Calculate Crypto Position Size: Risk Management for Volatile Assets

Hello, friends!

The cryptocurrency market is still quite new and unusual for most forex traders. What causes the most confusion is the trading conditions, which are non-standard for currency pairs, and this complicates the calculation of risks when opening a position. Risk calculation is almost the most important part of the trading process, and the price of a mistake here can be high.

Today we will look into the specifics of calculating risks in the cryptocurrency market and try to bring together all the main nuances of these processes.

Trading Conditions

Let us say we want to open a 0.1 lot position. Then the value of one point in XRPUSD is equal to: 0.00001 * 1000 * 0.1 = $0.001, or 1 cent in old points.

But myfxbook monitoring treats a full point in Bitcoin as a $1 price change. For ETHUSD and LTCUSD, it is 1 cent. Considering how variable the exchange rate is, the notion of a minimum point can change, so when analyzing monitoring pages, pay attention to the method used to calculate points.

Special attention should be paid to leverage. Due to the excessive volatility of cryptocurrencies, brokers are in no hurry to increase margin lending, as a result leverage above 1 to 10 is very rare, and most often it is limited to 1 to 3.

You can find the leverage for a specific contract, again, through the specification window. “Margin percentage” equal to 10% means that you commit only 10% of the full contract amount as collateral for the position, which gives us leverage of 1 to 10.

If you previously traded on Forex, where leverage is usually a couple of orders of magnitude higher, calculating the margin requirement in advance is a good habit. Otherwise, you may simply run out of free funds in the account and the position will be stopped out.

Calculating the margin requirement is also quite simple. To do this, we need to know the contract size, the margin percentage (leverage), the current price of the instrument, and the lot size. For example, let us calculate the margin requirement for XRPUSD: 1000 units of XRP * 10% * 0.20125 * 1 lot = $20.

To avoid calculating everything manually, you can use the auxiliary indicator UrovenZero (it can be downloaded at the end of the article). The indicator shows the maximum number of lots available to buy, the minimum possible margin requirement, the cost of a point, and much more on the instrument chart.

The indicator is installed in the standard way. First, download the indicator file, then in the terminal go to File — Open Data Folder and move the indicator file into the Indicators folder. After restarting the terminal, the indicator will appear in the Navigator panel.

When making trades, the indicator shows the moment a trade is opened and closed on the chart, and can also display profit, breakeven, and the average price levels of the total position.

When trading one pair, the risk per trade should not exceed 1-2% of the deposit. To calculate the position size correctly, use the lot calculator on our website.

Here, select the account currency, the initial deposit size, the risk percentage, the size of the stop loss, and the currency pair. Click “Calculate” and the lot size will be displayed in the “Results” field.

Since cryptocurrency does not depend on central bank working hours and is traded in a decentralized manner, the concept of weekends as such is absent. Therefore, if it is convenient for you to trade on weekends, trade only on weekends, since the market gives such an opportunity. But it is worth keeping in mind that the market on weekdays and on weekends is somewhat different, so the same strategies may perform differently depending on the day of the week.

Even if you trade with an expert advisor, or the risks are calculated for you by an indicator, you still need to understand the nuances of working with cryptocurrencies. Otherwise, it becomes much easier to panic and make a mistake in an emergency situation. Therefore, remember the small leverage and the non-standard contract size: these are the points where beginners often make mistakes by carrying over the characteristics of major Forex currencies. Also do not forget about strong volatility and the influence of news.

Download the Auxiliary Indicator

Best regards, Alexey Vergunov
TradeLikeaPro.ru

Pri torgovle odnoy paroy risk na sdelku ne dolzhen prevyshat 1-2% ot depozita. Dlya pravilnogo rascheta razmera pozitsii vospolzuytes kalkulyatorom lota na nashem sayte.

Zdes vyberite valyutu scheta, razmer nachalnogo depozita, protsent riska ot nego, velichinu stop-lossa i valyutnuyu paru. Nazhmite “Poschitat” — razmer lota budet otobrazhen v grafe “Rezultaty”.

Tak kak kriptovalyuta ne zavisit ot grafika raboty tsentrobankov i torguetsya detsentralizovanno, to i ponyatie vykhodnykh kak takovoe tozhe otsutstvuet. Poetomu, esli vam udobno torgovat na vykhodnykh — torguyte tolko na vykhodnykh, raz uzh rynok daet takuyu vozmozhnost. No, stoit uchityvat, chto rynok v budnie dni i na vykhodnykh neskolko otlichaetsya, poetomu odni i te zhe strategii mogut pokazyvat sebya po-raznomu, v zavisimosti ot dnya nedeli.

V tselom, iz-za bolshikh kolebaniy, slozhno podobrat stabilnuyu sistemu dlya torgovli odnoy valyutoy. Luchshe vsego torgovat portfelem iz neskolkikh valyutnykh par, takim obrazom diversifitsiruya riski. Kursy kriptovalyut slabo korreliruyut s fiatnymi dengami, poetomu khoroshaya ideya torgovat odnovremenno s kriptovalyutami instrumenty rynka Foreks, libo dazhe obedinit ikh v ramkakh edinoy sistemy.

Ochen vazhno sledit za vykhodom novostey. Rynok kriptovalyut ochen rezko reagiruet dazhe na samye neznachitelnye, kazalos by, obyavleniya. Edinstvennoe soobshchenie v sotsialnykh setyakh mozhet vyzvat rezkiy rost ili padenie kursa, i tut nuzhno byt vo vseoruzhii.

S uvazheniem, Aleksey Vergunov TradeLikeaPro.ru