Trades require risk management and fund management. The three most important aspects of being a trader are technical analysis, psychology, money management. But, what are you really thinking? You will never master these three essential points if you don’t know them. It is not your intention to remain in the abyssal of loss. We’ll explain more below RRR strategy and money management is the answer to financial maintenance.
Individuals Have Different Ways of Managing Their Money and Risk
Maybe not an unimaginable concept or relative, but it is quite simple. Money management refers to the way you manage finances when dealing with transactions. And how much money or a percentage of your portfolio you invest in each transaction.
How much money you will trade. How to regulate entry and exit of money. There are many other questions you might have about how you use the funds you trade. Risk management is the process of setting a stop-loss. You can choose to put your stop loss at a low level to obtain the RRR (Risk to Return Ratiohighest) or to have a greater stop loss.
It is a good idea to set a stop-loss for each trade you make according to your strategy. This can be a complex subject and requires high emotions. However, in many cases, it can save your life.
What Is RRR Strategy and Money Management?
The risk-reward equation is often a tool that can help you calculate the risk and reward ratio for any transaction. RRR 1 means that to earn one USD, BTC, or satoshi unit, you must take on one USD, satoshi and one BTC unit.
You can find this tool on the Tradingview Page, called long position and short position. A ratio (RRR) is a tool that allows you to determine the target and stop loss for a transaction.
The type of trader you desire is key to finding the right RRR. The RRR and the ratio will vary in each case. For scalping, it is recommended that you use a ratio between 1 and 1.5:1 (but this is not recommended if you are just starting out with scalping). Daily transactions should have a minimum RRR of 2:1. The RRR for short-term trades should be between 3:0 and 5:1, while it should be no less than 5 to 1 in swing trading.
Two Rules That Can Affect Your Transactions
Fund management is all about knowing how much you can invest, what kind of business you own, and how much risk it will take. It is recommended to invest if you want to be rich go invest the maximum amount.
In a transaction, account for 10% of your investment capital. This is a limit of 10 open trades. However, you do not need to consolidate! Additionally, each transaction must have a stop-loss. The stop loss should not exceed 10%. This means that the capital you are covering must be 1%.
Retrospectively test your strategy and capital before you begin Bitcoin trading and Forex trading. Aiming for the same RRR is not bad. It can give you the best results for your strategy.
However, it is better to do your own research on the financial limitations you have. Because everyone has different finances, and therefore different risk limits.
Conclusion on money Management and RRR Strategy
It may seem very simple to manage money and manage risk. I can assure you that it is difficult if it is taken seriously, particularly for trader psychology. It is nice to know that even the smallest details can make a difference in whether a trader is profitable or unsuccessful.
It is very evident what the differences are between a professional trader, and a blind novice trader.