Margin or leveraged trading is very risky. Especially when it comes to cryptocurrencies like Bitcoin you should be aware of this fact and be cautious with your handling of it. Here are 9 tips which might help you! In case there are words you are not familiar with, check our Margin Trading Glossary.
Don’t trade with money you can’t afford to lose
It sounds so simple but for a lot of people it is not. If you are a beginner, or even advanced, you should never invest money into (margin-) trading what you can’t offer to lose. Gain confidence in your trading-style first and just start with low amounts. If you trade with too much you will be more stressed and are potentially in for bad decisions.
Educate yourself about interest rates & conditions
You should understand the interest rates/fee conditions on different exchanges where you are trading on. Too many investors just “trade”, without even knowing those conditions.
Have an eye on upcoming news events
Major news events regarding Bitcoin or Ethereum for example can have a serious impact on the price, in both directions. Make sure you are regulary informing yourself when trading margin positions.
Pay attention on your liquidation price
Nobody wants to get liquidated and losing the whole position. It is important that you are always looking for possible short and long squeezes. A short squeeze for example is a jump in a cryptocurrency price, forcing short position holders to close their positions, which drives the price even higher.
Use a stop loss at any given time
Risk management is important and so are stop losses. But be careful to not set it up too close to your buy-in price. Otherwise you are out of the trade before having the chance for the turn-around of the market. And if it is too far, you are not minimizing your potential losses enough. Setting great tight stop losses is something you will get better at with the time as it requires a lot of experiments.
Buy over longer periods & smaller amounts
Build up your position over a longer time frame and not in one order. It lowers the risk level and gives you the opportunity to react on short term fluctuations better than if you go in with one big order.
Educate yourself about support & resistance levels
Support and resistance levels are very important to watch while trading Bitcoin on margin. If you are not familiar with this topic feel free to read our article here.
Leave some funds on the side
Don’t go all in. Always leave a good portion of your funds on the side, e.g. for averaging down a position.
Last but not least – don’t be too greedy, take profits from time to time!