CryptoRisk Management- 7 rules and a position size calculator
Most traders blow up their account not because they were wrong, but because they were too big when they were wrong. Risk management is the boring half of trading that decides whether you survive long enough to get good. This guide gives you the math, the seven rules, and a calculator you can use before every trade.
Position size calculator
EDIT ANY VALUE TO RECALCULATE
Portfolio size
$
Risk per trade2%
Entry price
$
Stop-loss price
$
Target price (optional)
$
Position size
$4,000
Units to buy
40.00
$ at risk
$200
Risk-Reward
3.0 : 1
Position vs portfolio40%
Watch out:stop-loss is above entry. For a long trade your stop must be below entry.
Section 01 · Quick answer
The one rule, the math, the discipline
The one rule
Never risk more than 1-2% of your portfolio on a single trade. Beginners use 1%, pros use up to 2%. With this cap you can lose 50 trades in a row and still have capital left to trade.
The math
Position size = (account × risk%) / (entry - stop). The stop-loss decides the size, not your conviction. A wider stop means a smaller position.
The discipline
Set the stop before entering. Never widen it. Never average down. Never trade twice your size to "win back" a loss. These four habits separate survivors from losers.
Section 02 · Drawdown math
The asymmetry nobody calculates
Recovery is not linear. A 50% loss does not need a 50% gain to break even, it needs a 100% gain. The deeper you draw down, the more dramatic the climb back. Print this table.
If you lose
You need to gain to break even
10%
11.1%
25%
33.3%
40%
66.7%
50%
100%
75%
300%
90%
900%
Why this matters: protecting capital pays more than catching every move. One 50% loss erases two 25% gains. One 75% loss erases years of work.
The 1-2% rule keeps you above 25% drawdown almost always. With 2% per trade and a typical 50% win rate, your worst likely streak (10 losses in a row) costs you about 18% of the account, which needs a 22% recovery. That is doable. A 50% drawdown is not.
Section 03 · The 7 rules
7 rules of crypto risk management
All seven are non-negotiable. Break one and you are gambling, not trading. The hero calculator above implements rules 1-4 mechanically.
01
Risk per trade ≤ 2%
The foundation. Never lose more than 2% of the account on a single trade. With $10,000 and a 2% cap, your worst loss is $200. This is the rule that lets you survive losing streaks. Beginners should start at 1%, scale up only after 100+ trades of consistent execution.
02
Set stop-loss BEFORE entering
Place the stop as a real exchange order, not a mental note. Never widen the stop. Tighter is fine. Wider means you decided to lose more after the trade went against you - the most expensive single mistake in trading.
03
Position size from the stop, not the gut
A wider stop forces a smaller position. The math: size = (account × risk%) / (entry - stop). Use the calculator above. Never size based on how confident you feel - confidence is the worst predictor of outcome.
04
Risk-reward ratio ≥ 2:1
Target should be at least 2x further from entry than your stop. With 2:1 RR, you can be wrong 50% of the time and still profit. With 3:1 you can be wrong 65%. Trades below 1.5:1 RR are not worth taking unless your win rate is exceptional.
05
Never average down losers
Adding to a losing position breaks rule #1 and feeds the worst impulse in trading: refusing to admit you were wrong. Average UP winners only. If you want to scale into a position at lower prices, plan it in advance with a fixed total size budget - that is not averaging down, that is a planned scale-in.
06
Maximum 5 open positions
More than 5 open positions and you cannot manage any of them properly. Edge dies. Sloppiness wins. Concentrate on the highest-conviction setups, leave the rest. Quality of decisions beats quantity every time.
07
Cash is a position
Holding 30-50% in stablecoins is normal, even healthy. Cash forces selectivity and gives you ammo when real opportunities appear. The pressure to "always be in the market" is a beginner mistake. Sit out, watch the alerts, take only the best.
Section 04 · The 5 mistakes
5 mistakes that blow up accounts
Almost every blowup story you read fits one of these patterns. They look harmless one at a time but each one breaks the math of survival.
REVENGE TRADE
Doubling size after a loss
You take a 2% loss, feel angry, open the next trade at 4% size to "win it back". The next loss is now 4% instead of 2%. Three of these in a row erases six months of careful trading. After a loss, walk away for an hour minimum.
STOP REMOVAL
Cancelling the stop near the trigger
Price approaches your stop. You cancel it because "it might bounce". This is the single most expensive habit in retail trading. Sometimes it bounces and feels brilliant. Once it doesn't, the loss runs from -2% to -20% in hours. The wins do not pay for the losses.
ALL-IN
High-conviction full-size bet
"This one is different, I am sure". You go in at 50% of the account. Markets do not care how sure you are. One bad trade now costs half the portfolio and needs 100% to recover. Confidence and probability are unrelated.
AVERAGING DOWN
Buying more of a losing position
Position is at -10%. You add the same size at -10% to "improve average price". Now if it drops another 10% you lose 20% of double the money. Adding to losers compounds losses fast. Plan size in advance or do not add at all.
TILT TRADING
Trading angry, tired, or drunk
After a big loss, after a fight, after midnight, after drinks. Decision quality drops 80% under emotional load. Trades placed in these states almost always lose more than the original problem. Walk away, sleep, come back tomorrow. The market will still be there.
Section 05 · Pre-trade checklist
7 questions to ask before every entry
If you cannot answer all seven with a clear yes, do not take the trade. Tape this above the monitor.
✓
Where exactly is my stop-loss, in price and as % from entry?
✓
What is my position size, calculated from account × risk% / stop distance?
✓
Where is my target, and is the risk-reward ratio at least 2:1?
✓
Is the worst-case loss under 2% of my portfolio?
✓
How many positions am I already in? (Limit: 5)
✓
Am I trading because of a plan, or because I just took a loss?
✓
If price hits my stop, will I actually let it execute?
Risk management is not the exciting part of trading. Entry timing gets the attention, but exit discipline keeps the account alive. Good entries on bad sizing still blow you up. Average entries on disciplined sizing compound. Pair these rules with the alerts on /live and you have a real edge.