Risk Management

One of the most important aspects of implementing an automatic trading strategy is to prevent significant losses that will potentially compromise a trader’s capital over the long-term. Before making money, it’s important to learn how to protect your crypto portfolio.

First rule of Trading: Cut off losses!

What is usually the biggest challenge for a trader is to realise and accept that a trade is not going in the expected direction.

Most traders focus on learning when to start a trade but don’t put enough effort on the exit strategy.

Risk management protects your crypto portfolio and prevents from further losses. However, it is crucial for the long-term success of any trader to understand that cutting a loss at the right time can be a move as successful as selling a coin at a profit.

With Coinrule it is easy to implement a defensive strategy that will promptly sell part of your portfolio in the case of sudden market drawdown.

You can identify one or more “static” levels (they don’t change over time) that are critical for the asset. When these price levels are breached, a severe price drop often follows. It is good practice to reduce the exposure to that asset at that point to prevent significant losses.



bitcoin stop loss



Another example can be a severe drop in price. This situation can also represent the beginning of an extended downtrend. Our algorithm can keep an eye on the market, checking for any of our coins with price decrease larger than 4% in the previous hour. If this happens, this rule will sell 50% of the holdings of the coin to reduce your exposure.



crypto risk management


Eventually, you may want to build a more advanced rule that, not only can protect your crypto portfolio, but also buys back the coin at a lower price. That will turn a stop-loss into a take profit!



crypto risk management


Of course, at your discretion, you can change all the parameters in the example based on your preferences.

Imagine, for instance, to reduce the price control only on selected coins in your wallet, instead of including all your holdings. You can do that using our DO NOT operator.

Leave a comment

Didn't find any solution?

Get in touch with us via the Live Chat or Contact Us Page!