Dip or Peak
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What to check before any crypto trade

Whatever strategy you use, the same few questions decide whether a trade can hurt you. Here is what to look at, and why.

· 3 min read

Risk and reward on a long tradeCandles rise from an entry line. A stop sits below the entry and a target sits twice as far above it. Target +2R Entry Stop −1R Buy
Risk is set by the stop, not by how much you buy. Here the target is twice as far away as the stop: a 2R trade. Illustration with simulated prices.

Key takeaways

  • Size every position from your stop so a loss costs a fixed slice of the account, usually 0.5–2%.
  • Only take trades where the target is at least about twice as far as the stop.
  • Check leverage, total open risk, upcoming events and your own reasons before every entry.
In this article
  1. Start with position size, not the entry
  2. What to check
  3. Keep a journal

Every other article on this blog is about a way to find a trade. This one is about the part that stays the same whichever strategy you use: how much you can lose, where you are wrong, and whether you are in the right state to be trading at all.

Most blown accounts are not the result of a bad strategy. They come from a reasonable strategy traded at the wrong size, with no stop, during a news event, by someone trying to win back yesterday's loss. None of that shows up on a chart, which is why it is worth checking deliberately.

Start with position size, not the entry

New traders decide how much to buy first and think about risk later. Flip it. Decide how much of your account you are willing to lose if this trade fails (most professional traders use somewhere between 0.5% and 2%), then size the position so that hitting your stop loses exactly that.

Position size = (Account × Risk %) ÷ (Entry − Stop)
Example: a $10,000 account risking 1% is $100. Entry at $60,000 with a stop at $57,000 is $3,000 of distance. $100 ÷ $3,000 = 0.033 BTC, or about $2,000 of exposure.

The position is $2,000 even though the risk is $100. The stop distance, not the amount you buy, decides how much you can lose. A wider stop means a smaller position, and that is fine.

Position size from the stop distanceWith $100 at risk, a stop 5% away allows a $2,000 position and a stop 2% away allows a $5,000 position. The loss at the stop is $100 either way. Same risk, $100 (1% of a $10,000 account), two stop distances Stop 5% below entry Position $2,000 red: the $100 at risk Stop 2% below entry Position $5,000 Tighter stop, bigger position. The loss at the stop is the same.
Same $100 risk, two stop distances: the stop sets the position size. Illustration with simulated prices.

What to check

  1. Can you name the strategy? If you cannot say which setup this is (a dip buy, a breakout, a trend entry), you are trading a feeling. Each strategy has its own rules for entry and exit, and you need to know which rules apply.
  2. Where is the trade proven wrong? Every trade idea has a price where it stops making sense: support breaks, the trend line fails, the range is lost. Your stop belongs just beyond that point, not at a round number or a percentage you picked because it felt comfortable.
  3. Is the reward worth the risk? Measure the distance to your first realistic target and compare it to the distance to your stop. If the target is not at least about twice as far as the stop, you need to be right very often just to break even after fees.
  4. What happens with leverage? If you trade with leverage, find your liquidation price before entering. It must sit well beyond your stop. If the exchange would liquidate you before your stop is hit, your real stop is the liquidation price and your position is too big.
  5. How much is open in total? Five trades risking 1% each is 5% of the account at risk, and in crypto those trades are usually correlated. When Bitcoin drops, most altcoins drop with it. Cap your total open risk, not just each trade.
  6. What does the higher timeframe say? Look at the daily and weekly chart before acting on a 1-hour signal. Trading with the bigger trend is easier. Trading against it can work, but it deserves a smaller size and a quicker exit.
  7. Is there an event coming? CPI prints, Fed meetings, large token unlocks, ETF decisions and exchange listings can move price far past any technical level in minutes. Either avoid holding through them or size down.
  8. Is there enough liquidity? On smaller coins the spread and slippage can cost more than your expected edge. Check the order book depth and the 24-hour volume against the size you want to trade.
  9. Why are you trading right now? Be honest about this one. Trading to recover a loss, because a post made you feel left out, or out of boredom are the most common reasons good traders make bad trades. If the honest answer is one of those, close the chart.

Keep a journal

For every closed trade, write down the date, the coin, the strategy, entry, stop, exit, and the result as a multiple of what you risked (called “R”: a trade that made twice the risked amount is +2R). Add one sentence on what you did well or badly. After thirty trades the journal will tell you which strategies work for you and which ones only feel like they do.

Keep reading

RiskBeginner

Managing a setup: stops, targets and the time limit

Every setup in this series shares one way to place the stop, take profit and close a stale trade. Here is each rule and the reason behind it.

27 September 2026 · 5 min read