Risk management profiles
Stop-Loss / DCA Hybrid
Our favorite! Combine best of both worlds. Sometimes referred to as 'safety trade' instead of DCA. This method combines a fast DCA setting that roughly equals the trade target, with a stop-loss roughly 2x the DCA threshold. Where Classic stop-loss is prone to getting shaken out but market volatility, this method smooths out short-term volatility as it doubles down on the next buy order to increase the chance of selling at a profit. As the position doubles down, the target and stop-loss are adjusted. However, downside risk is ultimately limited as bags can not be formed in the long run. Typically 1-3 safety trades are used.
- Maintain liquidity without having to use much back-up funds.
- Relatively high initial exposure, increasing potential profitability.
- Proven most effective in backtesting in the long run.
- If a stop-loss is anyway triggered after deploying DCA, this multiplies your loss too.
Diversified risk management
There is not one single best method for risk management, and what is best ultimately this comes down to your profile as a trader. However, in all cases, diversification is an extra layer of a smooth and strategic trading system. Just as it is wise to spread your investmens in multiple assets, it is strategic to not be reliant on just one risk-management profile.
For example, DCA Doubling would require a lot of liquidity (backup funds). Cryptohopper config pools can be used to separate for example a small pool with more trusted assets with DCA doubling, whereas a majority of coins is traded with stop-losses. This ensures that there in a market downturn, there will be enough liquidity to double down on your long-term holds.