Risk management for crypto traders
Crypto moves several times faster than forex. The traders who last are not the ones with the best entries but the ones whose losing trades are small and planned. These are the rules that make that happen.
Decide the risk first: the 1-2 % rule
Before the entry, decide how much of the account this trade may lose if the stop is hit. Many traders use 0.5 % to 2 %. At 1 %, ten losses in a row, which happens to every trader, leave about 90 % of the account. At 10 % per trade the same streak leaves about a third.
| Risk per trade | After 5 losses | After 10 losses | After 20 losses |
|---|---|---|---|
| 1 % | 95.1 % | 90.4 % | 81.8 % |
| 2 % | 90.4 % | 81.7 % | 66.8 % |
| 5 % | 77.4 % | 59.9 % | 35.8 % |
| 10 % | 59.0 % | 34.9 % | 12.2 % |
Let the stop set the size
The stop belongs where the trade idea is wrong, for example beyond the swing low you are trading from, not at a round number of dollars. The size then follows:
Coins = money at risk ÷ (entry − stop, plus fees per coin)
A wide stop means a small position; a tight stop a bigger one. The loss at the stop is the same either way. The crypto position size calculator does this with fees included, and the liquidation calculator checks that the forced exit is beyond your stop.
Stops that respect volatility
A stop closer than the normal noise of the market is hit by noise. Measure the noise: the average true range (ATR) or the average daily range tells you how far a coin usually moves in a day or a session. A common approach is a stop of at least 1 to 1.5 times the ATR of the timeframe you trade, placed beyond a clear level. Smaller coins move much more than Bitcoin, so the same risk buys a smaller position. See the volatility by session page for how ranges change through the day.
Coins move together
Most altcoins follow Bitcoin on big moves. Three long trades on three different coins are often one large Bitcoin trade in disguise. Count correlated positions together: if each risks 1 % and they all move with Bitcoin, the real risk is closer to 3 %.
Daily and weekly limits
- A daily loss limit (for example 3 %): reached, stop trading for the day.
- A maximum number of open trades, counting correlated coins together.
- No moving the stop further away once the trade is open.
- A journal: entry, stop, target, size, result and one line on why. Review it every week.
Worked example
Account 2,000 USDT, risk 1 % = 20 USDT. ETH long at 4,000 with the stop at 3,880 (120 below, beyond the last swing low). With 0.05 % fee per side (about 3.94 per coin), size = 20 ÷ 123.94 = 0.161 ETH (about 645 USDT). At 5× the margin is about 129 USDT, and the liquidation price is far below the stop. If the stop is hit, the account loses 20 USDT, not 645.
Tools for this guide
Questions
What is the 1% rule in crypto trading?
Risk at most 1 % of your account on any one trade: if the stop is hit, you lose 1 %. The position size comes from the distance to the stop, not from how confident you feel.
Where should I put my stop loss in crypto?
Where the idea is proven wrong, beyond a clear level, and at least as far as the normal noise (ATR) of your timeframe. Then size the position so that this stop costs your planned risk.
Should I use a smaller risk for altcoins?
The percentage can stay the same; the wider stops of volatile coins already make the position smaller. Count several coins that follow Bitcoin as one risk.
Does high leverage increase risk?
Not if the size comes from your stop. It does bring the liquidation price closer, so keep it low enough that the liquidation is well beyond your stop.
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