Risk management : stay alive to stay in the game
GainQuest signals have historically shown a maximum realised loss of around ~5% per coin over the past 6 months.
Important nuance:
That figure is based on closed trades only.
While a trade is still open, price can temporarily move further against the entry before recovering — meaning the unrealised drawdown can be higher.
In some market regimes, intratrade dips of ~8–10% are possible.
So what matters in live trading is not only the final outcome, but also how much “breathing room” trades typically need before they work out.
Your stop-loss placement and position sizing must account for that, otherwise you risk getting stopped out of trades that would have recovered.
Portfolio Drawdown ≠ Signal Drawdown
Does a 5% max loss per coin mean your portfolio can only drop 5%?
Portfolio drawdown depends on:
- how much you risk per trade
- how many positions you run simultaneously
- execution factors (slippage, volatility)
Our example
💼 Wallet: $1,000
🎯 Risk per trade: 1% of wallet = $10
🔻 Stop-loss distance: 1–3%
⚙️ Leverage: up to 20× (used for margin efficiency, not extra risk)
If you run 10 positions at once, and every stop is hit:
📉 Maximum planned loss = 10 × $10 = $100
→ ~10% portfolio drawdown (worst-case scenario)
(Actual losses may vary slightly due to fees or slippage.)
📊 Position sizing that scales with your stop
If you want every trade to risk a fixed $10, your position size automatically scales with the stop distance :
1% stop-loss
Position size = $10 / 0.01 = $1,000
Loss if stopped = $10
2% stop-loss
Position size = $10 / 0.02 = $500
Loss if stopped = $10
3% stop-loss
Position size = $10 / 0.03 ≈ $333
Loss if stopped ≈ $10
✅ Wider stop → smaller position
✅ Tighter stop → larger position
✅ Risk stays constant
Leverage and Margin Efficiency
Many traders assume leverage increases risk automatically — but that’s only true if position sizing is not controlled.
In professional risk management, leverage is mainly used for margin efficiency, not for taking bigger bets.
Key distinction:
- Position size determines your profit/loss
- Leverage only determines how much capital is locked as margin
Example: Same Trade, Same Risk — With or Without Leverage
A $1,000 position with a 1% stop-loss always risks:
That loss is the same whether you use leverage or not.
Without leverage (1×)
To open a $1,000 position, you need:
Your capital is fully tied up in one trade.
With 20× leverage
To open the exact same $1,000 position:
✅ The trade behaves the same
✅ The stop-loss loss is still $10
✅ Only the margin requirement changes
Leverage allows you to keep more of your wallet free, diversify, and avoid overcommitting capital.
Important Warning
Leverage becomes dangerous when traders:
- increase position size just because margin is available
- place stops too wide for the leverage used
- ignore liquidation levels
Even if your planned stop-loss is far away, liquidation can happen earlier if leverage is too high.
Leverage is a tool, not an edge.
⚠️ Drawdown control
So if you choose to have 1 % risk per trade and 5 simultaneous trades, your portfolio drawdown is capped at:
Max simultaneous trades: 5
→ 5 × $10 = $50
→ 5% portfolio drawdown cap
Even if a coin requires a much wider stop (example 10% stop-loss), your risk rule still keeps things controlled:
With 20x leverage, margin per trade:
→ 5 × $5 = $25 total margin — a very conservative buffer.
✅ These limits keep your exposure capped even if multiple trades hit their stops consecutively.
The goal isn’t to win every trade —
it’s to stay in the game long enough for your edge to play out.