Digiassetindo members who are beginners in the crypto world, at least they have heard of the term cut loss. Whether your trading/investment goals are short term or long term, you must have a decision to make if your portfolio performance is declining, especially during a bearish market. Actually cut loss is really necessary or maybe cut loss is not something that needs to be planned? For a general understanding, we have discussed it, please click the following link for the definition of Cut Loss. Then for the cut loss strategy trick:
- Limiting Losses Based on Percentage (%)
Before buying an asset, a trader or investor already has a stance if the analysis is correct or misses. To determine a loss limit, for example, 5% - 25% of the initial capital when buying crypto assets. So if the price decline hits the percentage limit, you can cut loss.
To determine cut loss using this method, you need to calculate the amount that is ready to be risked at the beginning of trading. So that when asset prices decrease and hit the tolerance limit, you can calculate at what price to cut loss.
2. Limiting Losses Based on Support Level Analysis
You can also cut loss by referring to the support level point that you have specified. So, you only need to cut losses if the price of the crypto asset you buy falls below the support level.
For example in the chart, you buy at the price according to the red arrow, because maybe you analyze it as a certain pattern. But it turns out that the analysis was wrong, so you can make a support level price area (green line) and then cut loss below the support area (blue arrow) according to your respective risk tolerance.
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