Category Archive : Bitcoin

Bitcoin Trading & Market Psychology

Emotions And High Volatility = Problem

The main problem with somebody who begins to trade in any asset-class is that there is no experience beforehand. No one is born the perfect trader; every successful one made a lot of mistakes and most of these mistakes are probably based on irrational actions caused by emotions.

This is a problem. Especially when you trade cryptocurrency markets like Bitcoin. Cryptocurrencies are, in perspective, a very new technology. Not only in general but in a technical way, it is different to anything available now, yet we still are seeing low adaptation and practical usage of the blockchain-technology. This paired with the fact that the market runs 24/7 means the emotional reactions of market participants are stronger than anywhere else.

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The Art of Liquidation: Part I – The OKEx-Whale

On exchanges that offer trading on margin there will be liquidations. If a trader works with ten times leverage and the price moves ten percent against him, there will be a margin call and the position gets liquidated. Now these exchanges usually operate on a peer-to-peer-system. That means, not the exchange provides the funds for leveraged trading, but the other traders. If a position is liquidated, the margin of the trader will be used to cover this. If a long position gets liquidated it will be automatically market sold and vice versa. Now every once in while there will be a whale in the gold fish pond who opens massive positions which – in case of liquidtaion – bust all orderbooks. This is a problem and an enormous risk for the market.

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