#Trading is an opportunity to generate profits but carries risks that can lead to significant losses if not managed properly. Capital management and understanding trading risks are the keys to success.
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1. Stop Loss and its Importance 🚫
A stop loss is an order set when entering a trade to close automatically when the price reaches a specified loss level, aimed at protecting capital.
🔵 Protects you from unexpected and uncalculated losses.
🔵 Helps in controlling emotions and making logical decisions.
🔵 Allows you to focus on your strategy without constant worry.
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2. How to set a stop loss and practical examples
🔵 Set the stop loss based on support or resistance levels, or a percentage (1-3%) of your capital.
🔵 Avoid placing a stop loss too close to prevent being exited due to market fluctuations.
Examples:
Buy at a price of 100 dollars, set maximum loss at 5 dollars → stop loss at 95 dollars.
Sell at a price of 50 dollars, stop loss at price rising to 53 dollars.
Capital of 1,000 dollars, risk 2% (20 dollars), bought 10 units at a price of 20 dollars → stop loss at a loss of 2 dollars per unit (price 18 dollars).
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3. A practical model for stop loss on Bitcoin (BTC) 🚀
Entry price: 30,000 dollars
Allocated capital: 1,000 dollars
Acceptable risk: 2% of total capital (200 dollars)
Amount of Bitcoin purchased ≈ 0.0333 BTC
Calculating stop loss:
200 dollars ÷ 0.0333 = 6,000 dollars drop
Stop loss price = 30,000 - 6,000 = 24,000 dollars
🔵 Stop loss at 24,000 dollars to limit loss to only 200 dollars.
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4. Rules of capital management and psychology in trading 💰🧠
🔵 Do not risk more than 1-3% of your capital in a single trade.
🔵 Diversify your investments to reduce risks.
🔵 Keep a reserve for emergencies and market opportunities.
🔵 Commit to discipline in implementing plans.
🔵 Accept losses on some trades as a natural part.
🔵 Avoid making emotional decisions after losses.
🔵 Keep learning to improve your skills and confidence.
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Summary:
✅ A stop loss protects your capital from significant losses.
✅ Capital management and discipline are the foundation of continuity.
✅ Psychological control is essential for making successful decisions.
> "Successful trading is patience, discipline, and risk management, not luck."