Every person, when aspires to become a successful trader, has to learn certain basic business rules that will help him earn greater profits and reduce the risk of running into losses. In the present Covid scenario, when there is no certainty regarding any action that a trader might take, it becomes inevitable for him to take calculated risk.
Hence, the knowledge of the Risk/Reward Ration can help a trader set up a successful business, whether physical with hard cash and concrete or virtual with crypto coins.
As the name suggests, the Risk/Reward Ratio helps in analyzing the potential reward or profit against its potential loss or risk. The risk and reward are decided by the trader at the beginning of the business. Putting it into a mathematical frame:
Risk/Rewards Ratio = (Entry Point – Stop Loss Point) / (Profit Target – Entry Point)
Where, Entry Point is the price at which the trade begins by purchasing or selling an asset or some other instrument. Stop Loss is the value which indicates that the asset or instrument that was purchased is not earning profit and the trader has to think over or stop investing further to reduce the loss.
Profit Target is the point where the trader realizes that the asset has earned a good amount of profit and the target is accomplished. All these three elements are strategically pre-planned by the trader.
So, if a trader calculates the R/R Ratio, and find it to be 1:3, it would mean that for every 1 loss or risk that he would face, he would be rewarded with a profit that would be 3 times more. This would be an ideal situation to continue the trade as the profit is higher than the loss.
Crypto-coins are a new normal today. Hence, it is important to understand the risks associated with it. And analyzing the Risk/Rewards Ratio is one of the keys used to keep safe from risks in Cryptocurrency.
The Working of Risk/Reward Ratio
It is important to understand that the trade that has lower risk reward ratio will be a better option to continue with. It would mean that profit would be more than the loss. However, it doesn’t mean the ratio has to be very low. A moderately low ratio is also good enough for a trade to continue. For the new traders, it is advisable to have a fixed Risk/ Reward Ratio.
There are certain apps and blockchain banks that provide services to calculate the R/R Ratio for its clients. With such blockchain banks like Kash, the risk management with the crypto-coins becomes hassle-free. Once you start earning profit through trade in cryptocurrencies, you need to learn to park your crypto-coins at some secure place like Kash saving account and Kash Checking account.
The Virtuality is a Reality Now!
The time has changed and so has trading. Most of the businesses have shifted their base to a virtual platform, which gives them easy access to clients and better security. The risks associated with the crypto-coins can be a credit risk, legal risk, liquidity risk, market risk or an operational risk.
All these risks can be minimized with services like Kash bank that will invest securely and manage your kash checking account, kash saving account and keep you updated about your kash wallet that can be accessed by any of your social media accounts at your fingertips.
So, calculate the Risk/Reward ratio with help of such virtual services and earn greater profit with crypto-coin easily without risk.