Risk Management

Position sizing determines how much capital you risk on any single trade. It's the single most important risk management tool.

The 1% Rule: Never risk more than 1-2% of your total portfolio on a single trade. If you have $10,000, that means risking no more than $100-$200 on any single position.

This may sound conservative, but it means you can be wrong 50 times in a row and still have 60% of your capital. With proper position sizing, you survive the inevitable losing streaks and live to trade another day.

Calculate position size: Position Size = (Portfolio × Risk %) ÷ Distance to Stop-Loss

A stop-loss is a pre-set order to sell your position if the price falls to a certain level. It limits your downside automatically — no emotion required.

Hard Stop-Loss: A market order triggered at your stop price. Simple and reliable.
Trailing Stop: Moves up with the price, locking in profits while protecting against reversal.

Take Profit (TP): A pre-set order to sell when your target price is reached. Removing the temptation to get greedy is as important as limiting losses.

Rule of thumb: Your reward-to-risk ratio should be at least 2:1. If you're risking $100, your target should be at least $200 profit.

Never put all your eggs in one basket — especially in crypto, where individual assets can lose 90% of their value.

Typical allocation framework:
• 50-60%: Core holdings (BTC, ETH) — highest liquidity, most established
• 20-30%: Mid-cap altcoins (SOL, BNB, ADA) — more upside, more risk
• 10-20%: Small-cap / speculative — high risk, high potential reward

Never invest more than you can afford to lose. Crypto markets can drop 80-90% in bear markets. Your investment in crypto should not affect your ability to pay rent, buy food, or cover emergencies. Keep 3-6 months of living expenses in stable assets outside of crypto.

In most countries, crypto is treated as property for tax purposes. Every time you sell, trade, or spend crypto — it's a taxable event.

Key taxable events:
• Selling crypto for fiat (EUR, USD, CHF)
• Trading one crypto for another
• Receiving crypto as income (staking, mining, airdrop)
• Spending crypto on goods/services

Not taxable: Buying and holding crypto, transferring between your own wallets.

Capital Gains: Short-term gains (held < 1 year) are usually taxed as regular income. Long-term gains (held > 1 year) often have lower rates.

Tax rules vary by country. Use tools like Koinly, CoinTracking, or Accointing to track trades and generate tax reports automatically.

The crypto space attracts hackers, scammers, and social engineers. Security is not optional — one mistake can cost you everything.

Essential security practices:
• Use a hardware wallet (Ledger/Trezor) for large holdings
• Enable 2FA on all exchange accounts (use an authenticator app — not SMS)
• Never click links in DMs — Discord and Telegram scams are rampant
• Never share your seed phrase — no legitimate service will ever ask for it
• Use a unique email + password for each exchange

Common scams:
• Fake support agents claiming to help you recover funds
• "Investment managers" promising guaranteed returns
• Giveaway scams ("Send 1 ETH, receive 2 ETH back")
• Phishing websites that look identical to real exchanges