Position Management: Basic Terms

Entry Price and Break Even are two key concepts in position management while trading cryptocurrencies.

Entry Price

Entry Price, the price at which we opened our position, is a key reference point from which traders measure the profits or losses of their position.

Advantages:
Clear starting point: Allows for precise tracking of transaction results.
Decision assessment: Helps in analyzing whether the decision to open a position was correct.

Risks:
Anchoring: Focusing solely on the entry price can lead to ignoring important market signals.
Emotional attachment: The entry price can influence emotional attachment to a position, which can disrupt rational decisions.

Break Even

Break Even, the price at which a position starts to generate profit, balancing all costs. In the case of short selling, this would be a price below the entry price.

Advantages:
Minimum goal: Sets a minimal target for the transaction to avoid losses.
Risk management: Helps in setting stop-loss and other tools to limit risk.

Risks:
Excessive caution: Setting the break even point too early can lead to unnecessarily closing positions with a profit.
Profit pressure: Focusing on achieving break even can lead to missing favorable moments to close positions at other points.


In both cases, understanding these terms and their effective utilization can significantly impact the success of cryptocurrency trading. They provide solid foundations for analysis, planning, and executing trading strategies.

Updated on: 12/11/2023