How Risky Is Leveraged Trading? Four Types of People Should Avoid It

How Risky Is Leveraged Trading? Four Types of People Should Avoid It

by May 11, 2020
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Leveraged trading, also known as margin trading, allows you to pledge a small capital to borrow 10x or even 100x more funds to open a position and earn the profits generated based on the borrowed funds.

For example, if you are using a 100x leveraged trading tool, it means that you can open a 100 BTC position by locking 1 BTC owned by yourself, you will earn the profits generated by the 100 BTC and it is possible to lose the margin.

Though there will be no negative settlement and you have no liabilities to cover what the vendor loses for you besides your margin, 100x leveraged trading will generate 100x fluctuation to make it riskier than spot trading.

The larger fluctuation made by leveraged trading allows many investors to earn big profits, the loss hurt as well, you need to understand you are taking with leverage funds.

One of the most worthy trying leverage trading platform is Bexplus, a bitcoin-based 100x leveraged trading platform designed for both pros and beginners, they offer a 10 BTC funded practice account and academy materials to guide those who’re learning to trade with leverage.

Being friends of different kinds of crypto traders, I can summarize the characteristics of the successful leveraged traders and this can be tips for who are judging if they are suitable to run leveraged trading.

Avoid Leveraged Trading if You Have No Time to Learn

The method of levered trading can be easily understood in 10 minutes but you need time to build your own principles when to trade and when not to trade. There is no guidebook in the market show you how to make profits step by step as the market is changing fast but you can find opinions from forums like TradingView or Reddit and judge them. The most useful learning method is through your hand (with a demo account or real account) – analyze, put, close, review, and improve.

Avoid Leveraged Trading if You Cannot Control the Moods

Futures traders make profits out of the difference of the open and close prices while leveraged trading makes the fluctuation happening frequently. You can earn big profits and you can lose hard if you open positions carelessly. Make sure you can find an independent space, at least, some time for your own without being disturbed, so that you can sit down to watch the trading signal or take a deep breath to fight back after a loss – you cannot win all the time.

Avoid Leveraged Trading if You Cannot Bear the Loss

The high profit of leveraged trading is the twin sister to the risk that born at the same time. Don’t use borrowed or loaned money to invest in leveraged trading to lead to a loss that you are not able to cover. Don’t put all of your assets to the market even you find a perfect trading signal. A piece of typical financial management advice is that you should divide your investments to certain parts for risk investments and certain parts for break-even investments.

Avoid Leveraged Trading if You Hate Reading Through Data and Graphs

An instinct for market change is a precious characteristic for traders but it’s not enough. You need to understand what is happening behind the K-lines and build a logic to predict the direction where it goes towards. Loving working with data and graphs give you a better experience than those who don’t like data analysis and information seeking.

bexplus

 

Featured image credit: Pixabay

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