Tutorial 9: Risk Management - Protecting Your Portfolio

Created by BITWHALE Official, Modified on Tue, 15 Apr at 11:44 AM by BITWHALE Official

Trading cryptocurrencies can be highly rewarding, but it also comes with significant risks due to market volatility. BITWHALE provides tools to help you manage risk and protect your portfolio, ensuring you can trade with confidence. This tutorial will guide you through setting up stop-loss orders, adjusting leverage, diversifying your trades, and monitoring your portfolio to minimize losses while maximizing potential gains.

Understanding Risk in Crypto Trading

Crypto markets are known for their volatility, with prices often fluctuating dramatically in short periods. Without proper risk management:

A single bad trade can wipe out your portfolio, especially with high leverage.
Emotional decisions (e.g., holding a losing position too long) can lead to larger losses.
Overexposure to a single asset increases your risk if that asset crashes.

BITWHALE's risk management tools, such as stop-loss settings and leverage adjustments, help mitigate these risks by automating protections and encouraging disciplined trading.

Setting Up Stop-Loss Orders

A stop-loss order automatically closes a trade if the price moves against you by a set percentage, limiting your losses.

Enable Automatic Stop-Loss
- Go to “Settings” > “Stop Loss Settings”.
- Toggle “Automatic Stop Loss” to On.
  - This sets a default 10% stop loss on all trades to protect your capital (e.g., if ETH drops 10% from your entry price, the position closes automatically).
- Risk Management Note: The platform warns, “Using automatic stop loss is recommended to protect your capital from significant losses. Without a stop loss, positions could potentially be liquidated, resulting in a complete loss of the position’s value.”

Example in Action

In the “Confirm Trading Strategy”, the stop-loss is set to “-10% from entry” for an ETH/USDT trade.
If you enter at $1558.78 (current price), the stop-loss triggers at $1402.90 (10% below), closing the position to cap your loss.

Adjusting Leverage for Safer Trading

Leverage amplifies both profits and losses, so using it wisely is key to managing risk.

Set Leverage in Settings
- Go to “Settings” > “Leverage Settings.
- The default leverage is 5x, which BITWHALE recommends for optimal risk management.
  - Risk Management Note: The platform advises, “Higher leverage increases both potential profits and losses. Our AI strategies are optimized for 5x leverage based on historical performance data.”
- Adjust the leverage if needed:
  - Lower to 3x or 2x for safer trading with less risk.
  - Increase to 10x (as shown in the Confirm Trading Strategy) for higher potential returns, but with greater risk.

Understand Leverage Impact

Example: With $35.42 (position size) at 10x leverage, your effective position is $354.20.
- If ETH rises 23.13% (predicted price of $1919.33), your profit is amplified, but a 10% drop triggers your stop-loss, losing $35.42 (your initial position).
At 5x leverage, the same $35.42 position becomes $177.10, reducing both potential profit and loss.

Best Practice
- Start with lower leverage (e.g., 5x or less) until you’re comfortable with the platform and market conditions.
- Avoid maxing out leverage, unless you’re confident in the trade and have a tight stop-loss in place.
Diversifying Your Trades
Overexposure to a single asset increases risk. BITWHALE's Premium and Professional plans allow access to more trading pairs, helping you diversify.
Access More Trading Pairs
Free Plan: Limited to BTC and ETH
Premium Plan: Access to the top 15 pairs (BTC, ETH, XRP, BNB, SOL, DOGE, TRX, ADA, LINK, TON, XLM, AVAX, SUI, LTC, DOT).
Professional Plan: 100+ trading pairs.
Upgrade your plan to trade a wider range of assets and reduce reliance on a single coin.
Spread Your Capital
Instead of allocating all your funds to one trade (e.g., $35.42 on ETH), split your capital across multiple pairs.
Example: Allocate $10 to ETH, $10 to BTC, and $15 to SOL (if on Premium).
This reduces the impact of a single asset’s price drop on your overall portfolio.
Monitor Correlations
Many crypto assets (e.g., BTC and ETH) are correlated, meaning they often move together.
Include less correlated assets (e.g., SOL or XRP) to further diversify and reduce risk.

Monitoring Your Portfolio
BITWHALE provides tools to track your open positions and overall portfolio health, helping you make informed decisions.
Track Open Positions
Go to the “Open Positions” tab.
Columns include:
Symbol: The trading pair (e.g., ETH/USDT).
Side: Long or Short.
Entry Price: Price at which you entered the trade.
Quantity: Size of the position.
Status: Active or pending.
Opened At: When the trade was initiated.
Regularly check this tab to see how your trades are performing and whether any positions are at risk.
Use Portfolio Analytics (Premium/Professional Plans)
If you’re on a Premium or Professional plan, you have access to portfolio analytics.
This feature provides insights into your portfolio’s performance, including:
Total gains/losses.
Asset allocation (e.g., 50% ETH, 30% BTC, 20% SOL).
Risk exposure (e.g., overexposure to a single asset).
Use these insights to rebalance your portfolio if needed.
Set Custom Alerts (Professional Plan)
Professional plan users can set custom alerts for price movements, helping you react quickly to market changes.
Example: Set an alert for ETH dropping below $1400 to manually review your position if the stop-loss hasn’t triggered.

Best Practices for Risk Management
Start Small: Use a small position size (e.g., 20% of your balance, as shown in the Confirm Trading Strategy screenshot) to test strategies.
Always Use Stop-Loss: Protect your capital by enabling automatic stop-loss on all trades.
Limit Leverage: Stick to 5x leverage or lower until you’re confident in your strategy.
Diversify: Spread your capital across multiple trading pairs to reduce risk.
Monitor Regularly: Check your open positions and portfolio analytics to stay informed about your risk exposure.
Stay Disciplined: Avoid emotional trading—let BITWHALE's AI and stop-loss tools manage your trades.