Trade Department Trading signals trigger actions to buy or sell securities or other assets generated through analysis. These analyzes may be generated by humans using technical analysis or indicators, they may be generated using mathematical algorithms based on market price behavior, or they may be combined with other market factors such as economic indicators. These signals may be for traditional assets such as stocks or commodities, or for relatively new digital assets such as cryptocurrencies. You can also learn more about this in our article about what are cryptocurrency trading signals.
How do trading signals work?
Trading signals can use a variety of inputs from several disciplines. Technical analysis is typically the main component, but fundamental analysis and economics can also be inputs. The goal is to provide investors and traders with an emotionless, mechanical way to buy and sell securities or other assets.
The following examples will help you understand how to read trading signals!
#MIRUSDT ENTRY - 3.465-3.15-2.88 take profits - 3.6- 3.78 - 4.32 - 5.4 - 7.2 Stop-loss - 2.7
The coin name is Mir/USDTThis example includes an entry, short-term target, long-term target, and stop loss!
What is an entry?
ENTRY points are the points at which you need to accumulate purchases between them. Area from 2.88 to 3.465
What is a Take Profit Target?
Take Profit (TP) An instruction to close a trade at a certain rate if the market rises so that profits are realized and added to available balance.. Take Profit is optional and can be set up after the trade has already opened. Additionally, you can go back and adjust Take Profit at any time while the trade is in progress. yes include TP as – 3.6- 3.78 – 4.32 – 5.4 – 7.2
What is a stop loss or stop limit?
A stop loss can be defined as a pre-order to sell an asset when it reaches a certain price range. This is used to limit losses or profits in a trade. This concept can be used for short-term trading as well as long-term trading. Investors pay a certain amount of brokerage fee and automatically place orders with a broker/agent. Stop loss is also known as a ‘stop order’ or ‘market stop order’. When you place a stop loss order, the exchange platform will automatically sell the asset at your stop loss price. In the example it is $2.7.
Also read What is Risk/Reward and Money Management?
Let’s move on to position sizing!!
What is position sizing?
Most of your take trades are traded with your entire portfolio – which is wrong!!!
It is recommended to trade with appropriate position sizes as just one mistake can result in your portfolio going to zero or a loss.
Before I leave, let me correct one misconception about position sizing. Position size and risk amount are not the same!
(If your trading capital is 1000$ and you are risking 1% per trade, this means that if your stop loss is triggered, your loss will be limited to 10$ (1000*1%=10$). Stop loss occurs. This does not mean your position size is $10)
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For example, if you have a $2000 portfolio, you should not invest the entire $2000 in one trade, but only a portion. Don’t put all your eggs in one basket. Risks must be managed appropriately and position and size decisions must be made. Keep a few key points in mind…
You can choose to risk 1% or 2% of your overall portfolio. Let’s use 2% here (in this case, 2% of $2000 is $40). This means that if your stop loss occurs, you will only lose $40, which is 2% of your capital/portfolio.
Let’s look at the above example presented in the trade signals section.
Before moving forward, here is the essential calculation of position size!
- Risk amount
- admission price
- stop loss
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Now let’s say I have $2000 and the risk I want to take is 2%. Take a look at the trading signals provided above and check the ENTRY POINT, TARGETS and STOPLOSS values.
So, I want to invest in MIR, but an idea comes to mind. How much should you invest to avoid losing 10%, 20%, 50% or even 100% of your capital!
Without wasting any time, let’s apply the formula. For example, I want to enter an entry at 3.15. Before you deposit any money, calculate how much you could lose on your investment and your worth at risk if your stop loss occurs!
Formula: (Capital x Risk/Stop Loss)
Now for example:
My Capital size is = 2000$ Risking per Trade is = 2% Entry Price = 3.15$ Stop-loss = 2.7 (14.31%) < Difference of 3.15$ to 2.7$ Now Using Formula: Capital*Risk/Stop loss 2000*2/14.31 = 280$ Position Size (Amount will be invested)
Steps to use the formula
- Go to the TradingView website.
- Then select the MIR/USDT chart and select the exchange you want to trade.
- In the Tools section, select the Long Position tool to apply it to your chart.
- Then go to the Long Position Tool settings and set the account size according to your capital and change the risk percentage you are willing to take (we recommend 2-3%, no more).
- Finally, set your entry price and stop loss price.
Long positions show quantity. MIR quantity 88.692 multiplied by entry price (3.15) = 88.692 * 3.15 = 280 (investment amount)
Now let’s look at the P&L!
profit –
Amount we invested 280/3.15 = QTY * 88.89 (Multiply this QTY with the TP price, 88.89 x 3.6 = 320$) The profit I gained 320-280 = $40
On the other hand, looking at the stop loss price being triggered at 2.7,
(Multiply the QTY with 2.7, 88.89 x 2.7 = 240) The amount I lose 240-280 = -$40
Note: Always perform position sizing and risk management. For your safety before starting any transaction. The mayors are big brother and sister. Don’t play with your emotions. They don’t care about that…you can handle the risk and the position size…make yourself strong in that respect.
