Erratic swings in the crypto market can raise a crypto price by as high as over 60% and that too in just a few days. And, if the market surprises with such sudden dramatic upswing, traders will make excellent profits if they can put in a hefty amount. But, it might not always be possible to invest a high roller amount from your own share in short notice. This is a place where leverage in crypto trading will be your ultimate friend. This timeless trading method helps to boost up your trading capital with additional funds from an external source- say from your crypto exchange. This way, you will be able to open a bigger trading position and enjoy higher profits- yet without shelling out a huge amount of capital from your personal share. Check out more at multibank.io.
Based on the discussion above, you can fathom why ambitious traders prefer to opt for leverage in crypto trading. The sheer possibility of earning higher profits with comparatively smaller investments could do wonders to add wealth to your bank balance. But, leverage in crypto trading could also leave you with heavy losses if the market does not work in your favor. Thus, it’s important that you be mindful of certain pro tips that will help you to minimize losses with leverage in crypto trading and make the trade work in your favor.
Also Read: leverage in crypto trading- Multibank
The post below will offer the most essential tips to keep in mind for a successful experience with leverage in crypto trading. However, before we jump into the tips, let’s get the basics (about leverage trading) straight.
Crypto leverage trading simplified
You already have a sketchy view of leverage in crypto trading.
It’s simple, if you don’t have the needed capital to open a bigger trading position, simply opt for leverage in crypto trading and borrow funds from your crypto exchange. The range of leverage can vary, ranging from 2x to even 100x on your margin.
The first thing you will need to sign up for leverage in crypto trading is “margin”. There are two kinds of “margin” that you will have to deposit for leverage trading. One margin is the initial capital that you will deposit to open the leverage in a crypto trading account. The other margin is the amount that you would always need to maintain in your account to keep the trading position active. The “margin” is leverage in crypto trading and serves as the “collateral” or security that the exchange needs to lend you funds for trading.
Another thing to note here is the “margin call”. If you encounter losses, the whole margin will get liquidated leaving your leverage in crypto trading position at the risk of being nullified. In such a situation, the exchange will send you a warning call reminding you to fill up the liquidated margin. If you can fill up the margin, your position will stay active. But if you can’t, your trading position will get closed.
Pro tips to remember for successful leverage trading in crypto
Set a limit before you start with your leverage in crypto trading.
Don’t forget, if you are earning profit at this moment, you might incur even bigger losses in the coming days. So, refrain from any practice of overtrading. Once you reach the set limit, take a short pause. Sometimes, you have to be on the sidelines and wait for the market to turn in your favor. You have to stay unemotional about the market when you are trading, especially when you have signed for leverage in crypto trading with borrowed funds. Do not just go after every single green candle that you would find.
Exit if losing
If you are incurring losses with leverage in crypto trading, just don’t move further.
Your ego might come in between triggering you to keep on trading till you reach profit. But, don’t let your ride get the better of you. This can be extremely risky as you are trading with lent funds. If your margin gets liquidated, you might be forced to close down the trading position altogether.
To help you here, exchanges allow you to maintain Stop-Loss limits. It sets a predetermined limit for loss and once you reach the bar, you will simply have to exit your trading position. If the market has entered a bearish phase, it would stay in the bear scene for some time. It would take some time to get into the bull phase once again. So, just wait and don’t move.
Follow both technical analysis and fundamentals
This is another tip when you are looking for a successful experience with leverage in crypto trading.
The TA aka Technical Analysis helps to gauge the future price movements of a crypto- on the basis of its historical actions. For example, it has been seen that BTC generally takes a dip a few months after it reaches the ATH. So, follow TA while deciding on your trade limit and loss limit for your chosen crypto for leverage in crypto trading.
The fundamentals will help you to decide the right crypto for leverage in crypto trading.
Unlike the TA, the fundamentals are about the basics about the crypto and the crypto project as a whole. The study of fundamentals helps to understand the goals of the crypto, the use cases, the roadmap, the upgrades that have been planned, and so on. Also, research on the fundamentals will help you to discover the credentials of the team behind the crypto project – and the overall prospect of a crypto. You need to study the fundamentals for choosing the right coin for leverage in crypto trading.
Close position when you are busy
When it comes to leverage in crypto trading, you need to be on constant monitoring all the time. If you think you are too busy at the moment to continue monitoring- say, you are on holiday or working on a special professional project- just close your trading position for the time being.
Last but not the least, when you are starting out with leverage in crypto trading, stick to a small margin.