Fund Allocation in Crypto

Fund Allocation in Crypto

“Don’t put all your eggs in the same basket!” Sound familiar? The same idea applies to crypto as well. Let’s look at allocating funds according to different strategies.

Separate funds

Why should we split our capital over several strategies or algorithms? Well, it’s an extension of the quote above, which applies to equities and the need to have a portfolio to reduce risk.

Indeed, even if it’s tempting, choosing only one project or company to allocate capital to is extremely dangerous. A company, even if its project is good, its cash flow and human capital as well, can go bankrupt due to external factors, as this year has unfortunately shown us.

Before delving into the allocation of funds specific to 4C-Trading in more detail, it is important to first look at risk/money management. Indeed, you can be the best analyst in the world, yet success will never be achieved without strict risk management.

What is money management in crypto?

It’s the proper management of your positions according to the quantity at stake in each trade, the correlation of your positions, in other words, their risk of going all in the same direction in case of an important movement, as well as the placement of stop losses. All this with the aim of maximizing profits and minimizing losses.

A crucial element of successful trading is to take the right position size on each trade. Position size is the number of shares you take in a stock trade, the number of contracts you take in a futures trade, or the number of lots you trade in the Forex market. It’s a common mistake to think that position size is chosen randomly, when in fact it’s not, nor is it based on how convinced you are of the trade.

Why is that? It’s simple, you can’t win in the financial markets all the time, loss is part of our business and properly sizing up your position will allow you to stay in it even if you cash in your stop-loss.

Fund allocation

The previous paragraph was intended to emphasize a crucial element of successful trading, risk management through the placement of stop-losses, takes profits, and position size.

This may sound complicated, but don’t worry, at 4C, Smart Margin does all this for you using a 2% fixed risk per trade.

How do you best allocate your funds using 4C products?

This will depend on your subscription and therefore on the number of SMART Bots available to you and your investor profile. Indeed, among our product offerings, the Smart BTC is the one with the lowest variance and is therefore the most conservative.

The Smart ETH and Smart LINK are a bit different, they lead to higher volatility of returns but also to much higher profits in the long term.

Finally, Smart Margin operates on the futures markets (on Binance Futures & FTX) with volatility between the Smart BTC, Smart ETH, and LINK bots.

What is the ideal distribution?

Ideal distribution normal
Ideal distribution conservative

A note on base Currency

The first listed currency of a currency pair is called the base currency, and the second currency is called the quote currency. Currency pairs compare the value of one currency to another—the base currency (or the first one) versus the second or the quote currency.

In the case of Smart Margin, the base currency will change according to the pairs, BTC, ETH or ADA. What will remain constant on FTX is the quote currency, which will always be in USD. You will therefore need to have USD, which is convertible from USDT directly on the platform, to participate in trades.

For Smart Bots, the currency quote will be exclusively USDT which you will have to keep in a specific account, one per Smart Bot.

You have now become even more knowledgeable on proper crypto trading practices! Get out there and start trading, see you there!

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