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Crypto Portfolio: Position Size & Stop-Loss

Crypto trades around the clock and has produced some of the deepest and fastest drawdowns of any asset class. That makes how much you hold and where you would exit far more important than which coin you pick. This guide covers position sizing, stop-losses in a market that never closes, rebalancing and the Indian tax angle that changes how you should rebalance. It is education, not a recommendation to buy any coin.

Start with the drawdown maths

Losses are asymmetric. A 10% fall needs an 11% gain to recover. A 50% fall needs a 100% gain. An 80% fall needs a 400% gain. Crypto assets, especially smaller coins, have fallen by more than half in a matter of months more than once. So the first question is not "what could I make?" but "what fall can I survive without changing my life?" Whatever you hold in crypto should be an amount you could see fall by half or more.

Three practical ways to size positions

1. Cap the share of your total savings

Pick a maximum share of your overall investable money for crypto, write it down, and treat it as a hard rule. Whether that is a small single-digit share or more depends on your situation and risk tolerance. Using borrowed money is the fastest route to forced selling at the worst time.

2. Split a core and a speculative bucket

Many investors hold the larger, most liquid assets such as Bitcoin and Ethereum as the bulk of their crypto, and keep only a small fraction in smaller tokens, where liquidity is thin and the chance of going to zero is much higher. Treat the speculative bucket as money you are prepared to lose entirely.

3. Size each trade by the loss you accept

Decide the exit-if-wrong level first, then work backwards. Position size = (amount you will risk) ÷ (distance from entry to exit as a fraction). If you will risk 2,000 rupees and your exit is 8% below entry, the position is 25,000 rupees. A tighter stop allows a larger position for the same risk; a wider stop requires a smaller one.

Stop-losses in a market that never closes

• No daily gap, but sharp wicks. Crypto has no overnight close, but a sudden wick can trigger a stop and then reverse. An ATR-based stop adapts to volatility so that normal swings do not trigger it.
• Stops only work if you can place them. Check whether your exchange offers stop orders, and remember that exchange outages and thin order books during extreme moves can cause fills far from your trigger.
• Weekends and nights count. You will not be watching 24 hours a day, so a plan that relies on you reacting instantly is not a plan.
• Do not use leverage as a beginner. Perpetual futures can liquidate a position within minutes. See the definition and read how crypto works first.

Rebalancing, and why Indian tax changes the answer

Rebalancing means moving back to your intended mix, for example trimming a coin that has grown to dominate your crypto holdings. In India, each sale of a virtual digital asset is a taxable event under specific rules, and tax is deducted at source on certain transfers. Losses on one coin generally cannot be set off against gains on another or carried forward. Details are in our crypto tax guide; confirm current rules with the income-tax department or a chartered accountant. Practical effects:

• Frequent rebalancing creates frequent taxable events, so many holders rebalance on a schedule or only when a position drifts well past its cap.
• Keep a clean record of every purchase and sale with dates, prices and fees.
• Selling a loser to "harvest the loss" does not offset gains elsewhere under the current framework, so do not count on it.

Custody and platform risk are part of position size

Coins on an exchange are held by that exchange, so you also carry its security and solvency risk. Splitting holdings across platforms, turning on two-factor authentication and, for larger amounts, learning about self-custody all reduce that risk. Our free crypto learning track walks through wallets, exchanges and common scams.

A simple review routine

1. Once a month, list every coin, its value and its share of your crypto total.
2. Check each against your caps (total, core versus speculative, single coin).
3. Review the exit level for each position and whether the trend still supports your plan.
4. Decide on trims or additions in writing before you trade, and record the tax impact.

For the equivalent process in equities see how to review your stock portfolio. If you want structured, live practice with cycles, 24/7 risk and position sizing, the Crypto mentorship track covers them.

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