Spot Trading and Execution · Crypto Trading Guide

A spot trading plan connects a reason to trade with an exit condition, size and review date. Write the plan before choosing the order button.

State a testable idea

A plan needs an observation, a proposed interpretation and evidence that would contradict it. A fictional example might study whether a price range holds after a scheduled network update. The update alone is not a reason to buy. Identify the horizon and explain why the market may not already reflect the information.

Translate invalidation into size

Assume a hypothetical $5,000 account and a chosen maximum planned loss of $50. A proposed entry is $20 and an exit trigger is $19. If you reserve $0.10 per unit for costs and adverse execution, the modelled risk per unit is $1.10. Dividing $50 by $1.10 gives 45.45 units. Rounding down to 45 keeps the modelled risk at $49.50 and entry value at $900.

Define what the calculation excludes

The stop may not fill at the assumed price. A gap, outage or withdrawal problem can produce a larger loss. The $50 figure is a planning constraint, not a guarantee. Check quantity increments, available funds and the receiving asset. A plain fully funded spot purchase has no leveraged position liquidation mechanism, but the asset can still lose most or all of its value.

Specify the review

Write the intended order type, cancellation condition, exit management and maximum holding period. Define what happens if the event is delayed or the thesis changes without a price trigger. Save the pretrade plan and actual results separately. A profitable rule violation is still a process failure. A planned loss does not automatically mean the research process was poor. Review several comparable cases before changing the method.

Try it yourself

Using the same $50 budget, risk per unit rises to $1.60. What is the largest whole unit position under the model?

Show the worked answer

31 units, because 31 × $1.60 = $49.60. The actual loss can exceed this if execution is worse than assumed.

Further reading

Educational material. Examples and rates are hypothetical, not trade recommendations. Product terms, eligibility and risks vary by venue and jurisdiction.

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