Money Management in Crypto Trading

In this lecture, I would like to talk about money management in crypto trading and how important it is to have a strategy before you put any real money into the cryptocurrency market.

Why I say real money? Because most of the platforms nowadays offer virtual trading or virtual investment.

Simply, you can practice on the market with virtual money without losing anything. But when you start trading or when you start investing, when you want to buy your first Bitcoin, your first crypto coins, you would like to follow a strict money management plan.

It is true that over 95% of the investors and traders lose their money on the Forex market and over 70% of the retail traders lose their money on the crypto market, and the stock market.

I know that because I used to work for brokers before I established the Academy.

Don’t put all your money in one market

So it is vital to have a good money management strategy and I will explain what that is with simple words.

Let’s say you have a capital of $10 000. This could be your savings or it could be the capital from your company. This could be what your parents gave you, I don’t know. But let’s say you have $10 000.

So how much of that amount you should spend on cryptocurrencies?

I would never suggest anyone putting all of their money into one market, meaning into crypto, into Forex, into stocks. A wise investor or trader will always diversify the risk between the different markets.

Yes, there are people who made a lot of money from the crypto market by putting all of their money into it in 2020, 2021, 2017. But at the same time, there are so many people that lost everything in 2018. So you want to avoid that risk.

Lower crypto percentage when investing in different markets

Keep in mind that there is always the possibility that the market can crash for any reason. Look what happened in 2020 with the coronavirus. Nobody expected it. At least the average people like you and me. So before you buy any cryptocurrencies, it is very important to grab a piece of paper and make a money management plan for crypto trading.

Say I have that amount of money. I will buy crypto with that amount of money percent and I will keep it strictly. For example, you have $10 000 and you say I will buy a maximum of $5 000, which is 50%. Personally, I find that still too much, and especially if you want to diversify between crypto, stocks, fiat currencies, you can go for futures, anything. And if you are investing in different markets, then you should lower the percentage for the crypto.

The important thing here is that you should always follow the rules set in your crypto trading money management plan. If you say 10% of my savings will go for cryptocurrencies, then no matter what happens on the market, is the Bitcoin at $100 000 or not, you buy with no more than 10% of your savings. If next month you earn more, you can add another 10%. If you said 10%, it means 10%.

My money management strategy for crypto trading

In the Bitcoin for Beginners: Cryptocurrency Investment course, I share with you what is my personal money management strategy for crypto trading. I share with you how I feel comfortable when I’m investing in cryptocurrencies. So this is a good money management example. The one that you follow strictly. If you ask me then I would say: “No more than 15-20% of your savings to go to cryptocurrencies!“

That would be the maximum I would go for and that’s what I use. I usually try to stick to 10% but if there are great possibilities on the market I would go to 15%, but a maximum of 20%. That’s how I personally do it.

So, if I have $10 000 saved I wouldn’t buy crypto for more than $2 000. That’s how I do it. It’s up to you, but make sure when you decide your risk to keep it strict and not to fall into the emotions. That will keep you longer on the market and that will make you profitable.

Thanks for reading the lecture. If you have enjoyed it, feel free to share your comments and appreciation below. I will see you in another lecture.