People often underestimate trading in a bear market. They absorb a loss of let’s say 25% and don’t realize they now need to make 33% profit to cover that loss.
Some of you might be going 😮?
Yes, it’s true you need to make more profit to cover losses and the higher your loss the higher your profits have to be to cover it.
Here’s a simple example that will make it easy to understand:
Let’s say you have $1000 and you buy altcoin $X then suddenly “boom” it drops overnight to $500. You made a 50% loss on your $1000.
50% of $1000 = $500. Now you have $500 to work with and to get back to $1000 you need to double your money! In other words, you need another $500 or a 100% increase in capital.
So to cover a 50% loss you need to make a 100% profit
Moral of the story keep your stop-losses small, as you can see a 10% loss takes about 11% to recover, but once you lose more, the gains you need to get back to your initial position becomes far more difficult to achieve.
