Did you know if you can learn the two concepts, you can develop your passive income in the crypto world? The probability and the profit-loss ratios are the universal rules to generate money. If you think that these two concepts are confusing, don’t worry; I will explain them to you in simple words.
Probability
From an academic perspective, it refers to trial and error and how many times you have succeeded and failed. For example, if you have found 5 trading opportunities, you may win on 3 and lose on 2. Another time you will have 10 opportunities, win 6 times, and lose 4 times. When you calculate how many times you will make more money than lose if the success ratio is more than the loss ratio, it means you have a winning probability.
Similarly, if you are starting a business and looking to find a suitable partner. If you have a great circle of friends, it is highly likely that you can find a suitable person more quickly. If you do not have a circle of friends, you can improve your networking to increase the success rate. When several people are added to your network, your chance of finding a good person is also increasing.
Similarly in the crypto world, if you have chosen low-probability events like buying at the bottom, your chances of success are not good. I am not telling you that buying at the bottom is the wrong strategy, but these events take a long time to happen. But if you focus on high-probability opportunities like participating in the pullbacks, your chances increase 100%.
Profit-loss ratio
In the crypto world, the profit and loss ratio refers to making a big profit and facing small losses. For example, every time you buy a new crypto coin, you must earn $2 and lose $1, like buying the coin with $100, setting the stop loss at 2%, and taking profit at 4%.
Only participate in those types of trading opportunities in which you have greater returns; if the opportunities have extremely low profit-loss, do not participate. For example, sell your half coins when prices are on the upper track of the weekly line and face small losses when the prices drop. In summary, only take those opportunities in which you have a profit-loss ratio greater than 2:1.
In conclusion
In order to make money in the crypto world, you need to develop your habits to do more with low cost and high returns, like regularly searching for suitable coins and only participating in more lucrative events.
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