Leverage & Margin Trading Cryptocurrency

[smithbrian]

Though several people may know about margin and leverage trading, not everyone knows what it means exactly. In simple words, margin trading is all about borrowing funds to invest or trade a financial asset like cryptocurrency. It has gained a lot of popularity of late since you can access bigger amounts to leverage your trade position. In other words, margin trading amplifies your trade, irrespective of whether you make a profit or a loss. Read more

How does margin trading work?
You can go for a percentage of your total order value when you have a margin trading account. Leverage trading comes into the picture at this point as traders use margin to create leverage. It allows you to buy more and open bigger positions with your existing funds. It is often described in ratios like 1:10, 1:20, or 1:30.

Given the volatile nature of cryptocurrencies where there are ample opportunities to earn profit from the swings, crypto CFDs have become a popular trading strategy. This becomes helpful as margin trading can be used to have both long and short positions. When you have cryptocurrency margin, you could buy crypto when the value is rising and sell when it is falling.

Margin Trading Strategies
There are a number of different trading strategies that can be used for margin and leverage trading in crypto. Some are as follows:

• Gradually Increase Trade Size:
If you’re new to margin trading, you should consider starting small and building up as you gain experience. This will help you cut down on potential risks.

• Practice Trading with Demo Trading:
A demo-trading account also known as a paper trading account can be handy when it comes to learning the tricks and trades of leveraged trading without putting any of your actual money at risk.

• Set clearly defined goals and minimize risk
Keep emotions at bay by having a well-defined risk management strategy in place and by outlining your profit goals. Remember that impulsive decisions could lead to severe losses.

• Divide your Positions:
Instead of putting all your eggs in a basket, you can try to divide your positions into portions, for instance, you can try to have a group of profit orders that can take the gain consistently. This may be a better alternative than taking them all at once.

• Limit the time period of your trades
Try to cut down the time you take to hold on to a position so the risk of unpredictable price drops and long-term market changes is ruled out.

Manage the risks with crypto leverage trading

Stop Loss
Putting a stop on your losses using stop loss is a method of dealing with pre-mature liquidation. It may happen when the prices do not move in your favour and though it is not a method that ensures you make no losses at all, it surely helps in managing the losses better when you’re in a sticky spot.

Take Profit
The opposite of a stop loss is a Take Profit position. It shows that a profit has been made when you reach an already defined level of gains. This formula helps in checking unpredictable volatile bursts of the market while making sure that your assets are not at risk.

Smart Leverage
When choosing margin trading, investors need to know that increased leverage is synonymous with more risk.

Negative balance protection
In the odd chances where your equity goes into negatives due to the market conditions, a few trading platforms will cushion the loss and bring your equity to zero as a safety measure.

Don’t Risk More Than You Can Lose
Irrespective of how proven your trading strategy’s success is, Bitcoin margin trading can move against you in no time, and thus, you must never invest more than what you can stomach losing. Typically, you should not put more than 5% of your account at stake. It should be an amount you can comfortably pay back if your investments were to move in the wrong direction.

Pros & cons of margin trading

Pros
Maximize profits
Margin trading helps you open bigger positions and thus promises better returns with your existing funds. When your margin trades are successful, the high leverage ratios can help in amplifying returns.

Convenience in trading
Margin trading lets you enter the market and open positions quickly without going through the hassle of adding more funds to get the same position size. They also let you trade conveniently and not let you miss a trading opportunity since you can act quickly.

Portfolio diversification tool
Margin trading lets you borrow funds that you can open a number of trading positions with. You can do this without compromising on the size of your trade and with considerably small amounts of starting funds. It helps you diversify your portfolio.

Cons
High Risk
High returns are generally followed up by high risks and this also applies to margin trading. Both returns and risks get amplified depending upon the market movements. Leverage trading could lead to massive losses as it increases your market exposure. Margin trading may also cause losses that are above and beyond your starting investment. The smallest movement in the market can lead to major losses.

When should you margin trade?
When you want to make more but invest not so much
Margin trading can be a viable option for you if you're limited by your present funds and want to gain through a major trade. Say you have $300 as your capital but you want to buy a Bitcoin worth $600, you can use margin trading to fund your trade.
When you want to diversify

Margin trading can improve your buying power if you want to diversify your portfolio and have access to limited capital. You can make use of margin trading to open a hedged position that will also keep your funds protected in the highly volatile crypto market.
When you understand the potential losses
Since margin trading can get risky, it is best avoided by amateur players who are not able to fully understand the losses that can occur. It is a better choice for seasoned players who know how the market works and have proper risk management strategies in place.

[Lavarda]

This is very useful information about cryptocurrency.

[Anonymous]

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[NickolasFennema]

After studying the article about forex https://bunny.financial/top-success-forex-traders-stories-of-all-time/ I wondered how I could start trading forex instead of crypto.
Understanding the forex market and winning at trading forex online is an achievable goal if you get educated and keep your head together while you're learning. Practice on a forex trading demo first, and start small when you start using real money. Always allow yourself to be wrong and learn how to move on from it when it happens. People fail at forex trading every day because they lack the ability, to be honest with themselves.

[Anonymous]

Hello, the emergence of non-fungible tokens and DeFi applications also indicates that people are moving away from Ethereum, the second most popular coin, towards alternatives that offer lower fees and better speeds.

[bellatornie]

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[Stever]

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