Thank you for taking the time to read this post. It holds a special meaning for me since it’s the first time I’m sharing my thoughts on a topic that I deal with daily as an algo trader: risk management. In this introduction, I’ll be discussing what risk management is and why it’s so crucial in the world of crypto bot trading. But before that, let me tell you a little about myself.

I am the CTO of Oxido Solutions, and my responsibility is to oversee all technical aspects of our company. This primarily includes ensuring that the trading algorithms I’ve developed continue to work flawlessly. This is our company’s lifeline since our clients generate a passive income using these algos. We receive a percentage of the profits they make, so if they do well, we do well.

To ensure the smooth functioning of our company, risk management plays a crucial role. Risk management refers to the techniques and strategies used to control and mitigate potential risks associated with automated trading.

One way to explain this concept is by using the example of a life vest. The purpose of a life vest is to reduce the risk of drowning in the event of an accident or emergency while boating or swimming. Firstly, the risk is identified, which in this case, is the risk of drowning. Secondly, the risk is assessed by evaluating the likelihood and potential impact of the risk. For instance, if someone is boating in rough waters or doesn’t know how to swim, the risk of drowning is high, and the impact could be fatal. Lastly, the risk is mitigated by wearing a life vest, which reduces the risk of drowning by providing buoyancy and support in the water, making it easier to stay afloat and increasing the chances of survival in the event of an accident.

Similarly, in algorithmic trading, risk management involves identifying potential risks such as market volatility or technology failures, assessing their likelihood and potential impact, and implementing strategies to control and mitigate them. For instance, setting position size limits or using stop-loss orders can help limit losses and reduce overall risk exposure.

Risk management is critical in algorithmic trading because the speed and volume of trades can lead to significant losses in a short amount of time if risks are not properly managed. Therefore, companies like ours place a high emphasis on risk management to protect our clients’ capital and ensure long-term profitability.

Now that you have a high-level understanding of the concept of risk management, I’ll be sharing how we apply it within our company in future posts. If you have any questions about risk management or anything else, please send us a message.

The opinion expressed in this blog article is for general informational purposes only and is not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.