Leveraged trading or margin trading is well-thought-out as speculative. When it comes to crypto, others see it as a risky type of trading. But, worry not. Here are ten must-read tips before you embark to your first crypto margin trade. These will help you, as an investor, to hone your trading skills and market understanding. Good luck!
It’s an unfavorable experience to be in a situation where you lose money. That’s why when you opt to engage in crypto trading, it’s a smart move to start with a small amount of money that you can tolerate to lose. Soon, you’ll learn how to maximize your returns by trying different strategies. The key here is to learn how to trade. Practicing with low levels of leverage helps you gain confidence to master the art of margin trading.
All loans have a particular interest rate for what is loaned out or for fees. In crypto exchanges, you must be aware of the interest rates and conditions. Being educated is your edge to succeed as a stockholder. You can strengthen your trading tactics by understanding interest calculations.
Major events can impact the market. That’s why it’s vital for you to be aware of upcoming events while you’re holding a margin position. For instance, Bitcoin ETF verdicts can affect the rise and fall of prices in the market. So, if in case there’s positive news that tells about a potential price increase, maximize the opportunity. You, as an investor, have a choice to purchase extra Bitcoin on margin to gain more profits.
The liquidation price is the cost wherein your position will get discharged resulting from a total loss of your position’s balance. In crypto margin trading, price manipulations, short, and long squeezes can impact your position. So to avoid missing a profit or a total loss of funds, it’s essential to monitor the liquidation price of your position.
Take a look at this example:
The “Stop Loss” is an ideal risk management tool that you can utilize in margin trading. Through this, you can avoid substantial losses when trades go beyond your expectation. Placing your stop losses accordingly is necessary.
Rather than placing orders in one go, you can follow the techniques that most successful investors do. They buy into positions over a period of time. Through this strategy, you can decrease the risk by making modifications if the market goes against you. A piece of advice — purchasing smaller amounts over time gives you a greater chance of obtaining a measured and lucrative trade.
7. Focus on Technical Support and Resistance Levels
During margin trading, minor cost variations can lead the price to touch short-term support and resistance levels. You can deal with various resistance levels over multiple time frames. This is through understanding Bitcoin and crypto technical analysis. Also, there’s a wide range of tools that can help you assess the cryptocurrency market.
As an investor, it’s necessary to protect your funds. Never risk it all on a single go. When a worse scenario comes, it can result to significant losses that can end your trading career. Plus, losing capital can put you in debt. To avoid these hassles, it’s critical to secure backup funds. In this way, you can safeguard yourself against loss by supporting more than one possible result. Have the skill to average down so that when trades go the wrong way, you’ll still have a favorable direction.
Crypto trading is like an uncontrolled river. You can expect that the process is continuously changing. To become a successful investor, never deviate from your original plan. The secret to success, which is true to all businesses, is to make decisions based on company rudiments. Moving forward, you must know how to place commands properly according to the supply and demand forces.
In crypto margin trading, you can’t guarantee a sure profit if you just put in your capital and then simply disregard the market flows for days or weeks. Any time, a bad turn that can result to significant loss of funds may happen unexpectedly. As a good investor, your vigilance is imperative. While thoroughly watching your trades, you must also be prepared to quickly respond when things go wrong. This is the best way to avoid significant consequential events and losing money.
Bonus Tips for You
Good to know: Most of the time, increasing the margin rate in most exchanges brings tauter liquidation costs and higher fees.
One More Thing Before You Go
Good traders recognize their slipups. But, they never stop to analyze and learn from them. They are determined to develop their skills to understand the market. Moreover, understanding how crypto margin trading works is essential. Once you become used to it, and gained some success, you can begin increasing your funds. By using the same effective strategies you’ve used before, it’s a sure thing that you’ll gain more profits.