Before you start trading or investing on the exchange, you need to understand clearly how to do it. That is why you cannot avoid planning. You need to answer the following questions sincerely and in full:
- What is your trading system? Where, why and when you plan to open and close trades?
- How will you manage the capital? How much money from your deposit will you use for every trade? How will a trade amount alter with time and with the deposit size change?
- What will your risk management be and how will you control your risks? How much are you ready to lose in one trade? What maximum drawdown will you accept during a day, week and month? What loss size will make you stop trading?
You should write down your trading system, capital management system and risk management rules in the form of an algorithm. If the trading system is not written down, it is rather difficult to follow it.
An example of one cryptocurrency investor shows it clearly.
An investor decided to start investing in Bitcoin in 2017, when its value was growing. After that, a drawdown started in the cryptocurrency market and lasted for three years. The investor had already been tired of waiting for a profit, so he immediately closed his Bitcoin positions, when the growth started in 2020, and took a small profit. So, the whole huge growth of 2021 was lost.
How could a preliminarily developed strategy help in such a situation?
You can find simple advice in many books on investing: invest for a long term, 10-15 years minimum.
That is why 3 years is a short period for assessing efficiency of an investment. A preliminarily developed strategy with an investing period could have helped the investor. Then the psychological pressure of a possible drawdown would be tolerated easier.
What protective strategies can a trader use for building his trading system? There are a number of trading strategies in the trading and analytical ATAS platform, which you can use for protecting your deposit and building your trading system.
In order to use protective strategies, you need to open the CHART TRADER window to trade from the chart: