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Stay away from Leverage and contracts trading

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Written by   179
2 months ago
Topics: Cryptocurrency

There are roughly three common trading methods in the crypto market: spot trading, leveraged trading, and contract trading.

Spot trading does not add any leverage . The actual price and profit /loss corresponding to a buy and sell are caused by the actual fluctuation ratio of the currency, just like doing normal trading.

Both contract trading and leveraged trading enlarge the capital and are involved in cryptocurrency trading in a small and broad way.

Leveraged trading is also a kind of spot trading, which requires holding a certain amount of cryptocurrency or stable currency, and trading through mortgages and loans. As long as leverage is added, it means that two-way trading is possible.

For example: Leverage is long, you judge that the currency is going to rise, then you borrow more USDT by collateralizing your own currency or USDT, buy more coins at the current price, and wait for it to rise higher. After buying the price, sell the currency, return the borrowed part, and the rest is your own profit.

Leverage is short , you judge that the currency is going to fall, you borrow more coins through mortgage, sell it in advance at the current price to get USDT, after the currency falls, you can buy more coins at a low price, then the amount of extra money is your profit. Return the borrowed amount and take the profit.

Leverage and contract trading multiplier are set by the exchange, we will give a choice when trading, usually 1-100 times, of course, maybe support 125 times leverage . If you are bold enough to have enough money, you can choose to do a high leverage contract.

Next, let’s talk about the contract. The contract is an upgrade of leverage. It is more flexible than leverage. It does not need to borrow or repay the currency. The operation is simple. You can operate with currency or USDT in your position. The contract is divided into two types. One type is a perpetual contract, which means that the position can be held for a long time. The other type is limited-time contracts, which are divided into: current week, next week, and quarter, which means that when the time of the holding contract expires, no matter the profit or loss of the contract you hold, it will be automatically closed for you.

Generally speaking, whether it is leveraged or contract trading, the main purpose is to use small gains, and the risk is naturally reflected in the leverage. If the direction is correct, the return will be much greater than spot trading. Once you do the wrong direction, you can close the position in time. Recover some losses. If it is too late to close the position, there will be a situation of liquidation, but because you increase the leverage, the market will fluctuate a little and the risk is very high.

Leveraged trading and contract trading are actually a type of gambling. Even those who watch the market often have a good sense of the market, and the technical analysis is also very good. There are also times when the market is constantly changing, especially the cryptocurrency itself is extremely volatile. Playing with leverage and contracts is a tightrope walk.

Many people who have just entered the currency circle always want to use leverage or contracts to realize their dream of getting rich overnight. The current crypto market lacks effective supervision. You dare to play contracts. Ask for trouble! Even if the exchange does not do evil, the risk of trading with leveraged contracts is extremely high. Don't think of yourself as a god, stay away from the contract trading for a few more years.

In short: Leverage and contracts will make you rich (you put most of your time and energy into it), and will also let you die fast, so if you don’t have the ability to bear the consequences of investment failure, please stay away from all leveraged investment, So stay away from the leverage trading and live life well.

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Avatar for arslankhalid
Written by   179
2 months ago
Topics: Cryptocurrency
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Comments

How about if I have plenty of money to fund the trading, then I will leverage it on trades?

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2 months ago

That is why I stay away from leverage sir because I want to live well now 😂 thanks for the article sir.

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2 months ago