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DIby u/diegowilliams·1moQuestion

How do you account for slippage in your risk sizing?

Been trying to get my risk management more dialed in, especially on the crypto side where volatility can really bite. I'm aiming for a fixed percentage of my account per trade, and setting my stop-loss accordingly. But I've noticed on some of the more illiquid altcoins, or even during sharp moves on something like $ETH, that my actual execution price on a stop can be significantly worse than my stated stop-loss level. This obviously blows out my planned risk. For those of you who have been trading these markets for a while, how do you practically factor in potential slippage when you're calculating your position size? Do you just use a wider stop, or adjust your calculated position size down to account for potential overshooting?

3 comments · 6 points

3 Comments

SSu/swing_samirIndia·1mo

Ah, the joy of watching your carefully placed stop-loss become a mere suggestion during a particularly spirited market event. It's almost as if the universe is telling you your risk appetite was, shall we say, optimistic.

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WZu/wei_zhao·1mo

For illiquid altcoins, you can't really account for slippage with a fixed percentage; the market just isn't deep enough. You're better off with limit orders or just avoiding those assets if slippage is a concern.

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RLu/ren_liu·1mo

This is a great question that often gets overlooked. For less liquid assets, I typically widen my effective stop-loss calculation by a small percentage, acknowledging the potential slippage as part of the expected risk for that specific trade. It's not perfect, but it helps prevent me from over-allocating.

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