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5 tips for safe leverage trading in volatile market

The post below outlines the major strategies to follow while opting for leveraged trading.

.. 4 years ago 118  

Leverage trading can bring both high profit and loss, depending on the state of the market. The scale of gains and losses will be even higher when you are opting for leveraged trading in an extremely volatile market like cryptocurrency. Crypto, despite the recent proactive efforts on introducing regulation, is still in the Wild West zone. A single tweet of an influencer still holds the power to soar or dip the market value of crypto in just a few hours. Such wild volatility  can leave leverage traders with huge losses if the market actually takes a dip. However, there are certain tested strategies that have proven to ensure safe leveraged trading in several cases. Read more here https://multibank.io/page/leverage

If you too are aspiring to register for leveraged trading, you need to play safe. Volatile markets like crypto show no mercy to traders and you might end up being demotivated to trade more than once or twice if you encounter loss. It’s primarily because, if your leveraged trading meets with a loss, the loss would be on an amplified amount – and not just on the amount that you had shared from your own wallet.

So, let’s say, you have taken 10x leverage for leveraged trading. Your total trading capital is now standing at 10:1 ratio. It means you have borrowed 10x of your actual trading capital for leveraged trading.  Now, if it had been a regular trading option and if  the trader had met a 5 percent dip, your loss would have been calculated on just the basic trading capital- i.e. 5% loss. But, in leveraged trading, you will borrow funds. So, based on the example above, if there is a 5 percent dip, you will experience 50% loss as you are trading with 10x leverage.

Also Read: https://multibankfx.com/products/digital-assets

Leverage trading is not scary, it’s rather risky though. It’s because the typical trading method brings the returns (both loss and profit) in amplified form. However, if you proceed with caution and don’t get overly ambitious with trading goals, you will have a safe trading experience even with leveraged trading.

The post below outlines the major strategies to follow while opting for leveraged trading.

Set control line

The first word for safe trading is control; it’s even more important when you are trading in an extremely volatile market like crypto. Put simply, you need to practice restraint when you are signing up for leveraged trading in the crypto scene.

There are two control lines or bars that you have to set with leveraged trading in crypto. One is “Take Profit”. In this case, you will set a bar on trading based on profit returns. The idea is to stop trading activities for the time being once you reach your profit goals for the moment. While more profit is always welcome, yet when it comes to crypto, you never know when the market might drop into the abyss right from the peak. Thus, it’s better to proceed with a realistic profit goal. Once you reach that mark, it’s better to stop. Nothing is worse than wasting money while waiting for higher profit.

The other one is Stop Loss. In stop loss, you set a limit for loss. Some traders could be too egoistic to admit loss and leave the trade for the day. They would keep on chasing for the slightest of profit even when the market has taken a sharp dip and shows no recovery signs for the moment. And that could lead to even higher losses. When the market has plummeted, just wait, don’t move further. The stop loss bar comes handy in these situations. When you set Stop Loss line, you won’t be able to trade for the time being once you reach your loss limit.

Be careful of the leverage

Based on the example above, if the trader had taken 5x leverage, he would have met with a much lesser 25% loss instead of 50% as had been the case with 10% leverage.

In other words, lower leverage implies lower scale of losses. Crypto is an extremely volatile market and you might encounter losses at some point of time. But, you have  to make sure, the scale of loss must not hamper your basic finances, expenses, and regular life. Thus, it’s better to start with 2x leverage –and then, if you feel comfortable, you can stretch to 5x leverage.

Choose coin wise

Crypto represents a volatile market while leveraged trading is risky. Thus, you need a crypto that would assure some degree of stability in the market. While some altcoins are truly promising, these might not be backed by a sustainable future always. For safer trading, it’s better to opt for stable coins. These coins are linked to fiat currencies like USD, EUR etc. and hence are comparatively more stable than other cryptos. If you are unable to choose from stablecoins, you can always opt for legacy coins such as Ethereum or Bitcoin.

The idea is to settle for a crypto that won’t fluctuate at the drop of a hat.

How much margin?

There is a simple process to determine the ideal amount of margin for crypto leveraged trading.

Just ask yourself- would you be able to refill your margin account with the same amount of margin that you are planning to maintain for the maintenance margin? If you encounter a loss, the  margin will get liquidated. You will be asked to refill the margin as soon as possible. If you think you will be able to refill the margin amount, then go for that margin. But if you think the amount would be too overwhelming for refills on short notice, then it’s better to lower the margin amount.

Be careful of trading fees

 

Last but not the least, you must be careful about your chosen exchange. There is no point in opting for leveraged trading if more than half of my profits is gone paying the trading fees to the exchange. Thus, look and settle for a reliable exchange that does not charge an overwhelming profit percentage. The fees must be affordable.

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