The world with high risk of cryptocurrency trading: Understanding lever risks
Cryptocurrency trading has increased the potential to make rapid price changes. However, this popularity also comes with a significant risk factor: lever. The lever can offer
What is the lever?
The lever in cryptocurrency trading refers to the use of borrowed funds or margin account to amplify the potential earnings or losses. This
To understand the lever, to consider an example:
I suppose and trader buys 10 bitcoin (BTC) at $ 9,000 per coin, with a 100: 1 lever factor. The trader can make $ 700 per coin (the difference between the original purchase and sale prices). This is a significant risk because it represents 7.5% of the initial investment.
Risks associated with lever
While the lever can provide opportunities for fast profits, there are several observations associated with its use:
- Liquidity risk :
- margin call :
. High volatility periods, even small changes in market conditions can lead to significant losses.
- This increases the general cost of trading and exposes them to a higher risk.
- Default risk :
Risk attenuation
Cryptocurrency
- Diversify the portfolio
:
- Use the margin in a responsible way :
3.
- Set Stop-Loss commands : Set stop commands to limit potential losses if a trade does not go in your favor.
.
Conclusion
The trading of cryptocurrencies with lever presents significant risks that must be taken into account before entering the market. While the lever can provide opportunities for fast profits, it also requires discipline and caution to avoid substantial losses. Strategies to mitigate them, traders can make them informed, traders
Recommendations
- Start by learning about the basic elements of cryptocurrency trading and understanding the concept of lever.