When you suffer a trading loss it always hurts a little. These losses might actually be worse than you initially suspected. We've put together a table comparing percentage loss and the subsequent percentage return needed to get back to where you started.
The biggest takeaway from the table is that percentage loss does not equal the gain percentage needed to get back to where you started.
We can see that the more you loose the greater the percentage return required to get back to break-even. If you invested in bitcoin and lost 5%, you would now need to make 5.26% to get back to where you started. Let's say however you jumped into the altcoin markets and lost a whopping 90% on a coin. You would need to now make 900% to get back to where you started. These kinds of losses show the importance of position sizing and stop-losses.
Let's do a more specific example, you got into the bitcoin markets and bought some at $50,000 and sold at $35,000. You just lost 30%. To get back to $50,000 however, you need to make 42.86%. Specifically, that's 12.86% extra you now need to make than what you lost.
It's been suggested that trading's golden rule, first coined (pun intended) by Van Tharpe, is to ‘cut your losses short and let your profits run’. Although digital currencies have their own unique characteristics, they share a lot of commonalities with other financial assets. Stop-losses can be applied to bitcoin and altcoins to prevent irreversible losses. Most crypto exchanges offer this stop feature built in to their platform.
The idea of cutting your losses short is to not let your return to break-even get too out of control on any one position. Risking large amounts of capital on any one crypto trade could unexpectedly destroy an entire portfolio.
This crypto return calculator is designed to show you your percentage gain or loss and also back to break-even. Let's use a simple example to demonstrate. Keep the Use Crypto Price radio button selected. Set the Enter Initial Crypto Price to 10000. Set the Enter Final Crypto Price to 7000. Click Calculate.
In the above example we can see that if we firstly invested money into a coin with an initial price of $10,000. Then that coin' price dropped to $7,000. There was a loss of -30%. We would need to gain 42.86% to get back to even.
Thanks for using our tool and good luck with the trading!
This post and crypto tool are not intended to be used as general or personal cryptocurrency investment advice. I am not a financial advisor and recommend you consult with a financial professional before making any serious financial decisions.