I’m sure you’re wondering how much you can actually make from crypto-trading.
You’ve seen some people living flamboyant lifestyles who say they are crypto traders. They seem to have a lot of money. And maybe, they do!
Can you actually make a lot of money trading crypto? Yes! The market is volatile which means that opportunity abounds.
Can you lose a lot of money? Yes! The same opportunity a volatile market avails you is accompanied by a similar risk.
Hence, to determine how much you can make trading crypto, there are certain factors you must put into consideration; your account size, risk appetite, risk management, and trading strategy.
This is why you must not compare yourself or your result to that of other traders!
You certainly can’t compare an account size of $10,000 to $1000, or $1000 to $100.
However, you must understand that majority of traders who trade very large sizes blow up their accounts.
If you intend to trade large accounts, you must first determine if your risk appetite can handle the potential losses. Someone may be comfortable with a 5% loss on a trade which equates $50 (with a trading capital of $1000/trade), if you try the same, you pack up in 10 days.
And… never trade large sizes because someone else is doing so. Trading is not a competition. You’re trying to improve your earnings not, out-earn another person.
Trading must not be treated as a get-rich-quick scheme! If you do, chances are you’ll blow up your account, especially if you’re trading futures with leverage.
About the most important thing in trading is your risk management! This is where you control your potential losses. A “stop-loss” feature helps you control this.
How much are you willing to lose per trade if it goes wrong? How much are you willing to make in comparison to how much you’re willing to lose per trade (the risk-reward ratio)?
Let’s see a practical example!
Imagine this is you – a full-time day trader who does this stuff for a living
You enter a trade with a capital of $1000 with a risk-reward ratio of 1:2.
This means that for every trade, you’re willing to either lose 1% or make 2%. Nothing more or less!
Since trading is a zero-sum game, we’ll assume you’ll have losing trades too (they will come). And let’s say you take 30 trades per month, that’s an average of 1 trade per day.
If you lose 1% for straight 15 days, you’ll have a balance of $855.
If you win the next 15 trades at 2%, you’ll end up with a balance of $1142 in a month. Profit= $142
In the above illustration, you can see we used very conservative numbers, even with a high losing frequency, but a lower ratio. And, this example paints more of a Futures Trader’s account.
That’s not to say you can’t make way more trading crypto.
Opportunities are boundless! We’ve seen altcoins move 100+ over and in a day, week, or month. So,
if you’re trading the spot markets, you can enjoy this benefit that you can’t find trading other instruments like stocks, forex, etc.
Another scenario!
From the image above, we assume you take a conservative 2% profit every day (without losses), you’ll end up with $1600 in 30 days. With compounding interest, you’ll end up with $16,777 in 6 months – assuming you have a full-time job that settles your bills and you don’t need to withdraw your profits.
Using a very modest account of $100, in 6 months you’d have $1,677 with compounding interest.
Nevertheless, there are different strategies for trading. And you don’t have to be a day-trader.
Let me point this out too. You don’t have to trade with leverage. You can still be profitable trading without it. However, leverage increases the possibility of earning daily (frequently) from trading, without having to be exposed to the actual asset eg bitcoin.
So, in general, how much you can make from trading crypto is relative to your account size, risk appetite, risk management, and trading strategy. The beautiful thing is actually that there is no cap on what’s possible if you know exactly what you’re doing.
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