Cryptocurrency users do have a wide range of services in which they are able to now trade using leverage. In general, margin trading is an activity that just expert users are able to handle and that would be able to deal with. In this article, we will share 3 tips to trade cryptocurrencies with margin. The guide is going to help newcomers to the space that want to understand which three things to take into account the most when dealing with virtual currencies and margin. Disclaimer: All the information provided by AltSignals and its writers shouldn’t be taken as financial advice. The article has been created for educational purposes. Never invest more than what you are able to lose and only ask for advice to your personal financial advisor.
What is Margin Trading?
Margin trading is the activity in which cryptocurrency users borrow money from other users in order to increase their profits. By borrowing these funds, users will have the chance to multiply their exposure to specific trades and potentially earn a larger sum of money. However, trading with leverage can be very risky considering positions can be liquidated very fast. This could make the trader lose all the funds they were using as collateral. This is one of the main reasons why it is certainly necessary to trade with clear and tight stop-loss orders.
Tip 1 – Use Tight Stop Loss Orders
This is one of the most important things when we are trading with margin. Stop Loss orders allow users to buy or sell a specific digital asset once it reaches a certain price. For example, we can open a long position with 50x leverage. If we are sure that the market is moving higher, then we can set up a stop loss below the entry price level. In this way, if the market goes down, our position will be closed with a minimum loss but we will not risk our entire collateral in case we were completely wrong about the direction in which the market was moving to. This is very important to understand about margin trading. The larger the collateral we use, the tighter the stop loss we want to place in the market. This would protect our capital in case the market moves in the opposite way to the direction desired. You can place a stop loss close to 2% or 3% below the purchasing price. This would allow the price to minimally fluctuate below the price we entered without closing our position. If the price falls below that level, then our collateral will be protected.
Tip 2 – Use Crypto Trading Signals Providers
One of the best ways to improve our trading strategies and protect our capital is by following crypto trading signals providers. These companies are providing clear information about when to enter or leave specific markets in certain exchanges. One of the best crypto trading signals providers is AltSignals. This company has been operating since 2017 and it is offering services to hundreds of users from all over the world. At the same time, this is considered to be one of the most trustworthy crypto trading signals providers in the world. In this way, if you set up your trading signals for the BitMex exchange, you will get information about which is the best moment to enter or leave specific trades with and without margin. Moreover, they will let you know which is the amount of leverage you should use for these specific traders.
Tip 3 – Never Invest More Than What You Are Able To Lose
This is one of the most important things you need to take into account at the time of trading with leverage. When we trade virtual currencies we are talking about very volatile and risky assets. Users and investors should be sure about the positions they open and how they handle them.It is very important to mention that investors should never invest more than what they are able to lose. Positions can get liquidated very fast (the market is very volatile) and users could lose their collateral in a few minutes – if not seconds. Be always sure which are the positions you open and try following crypto trading signals providers that would help you have a better idea of which could be better moments to enter or leave the market. You can also reduce your portfolio exposure to cryptocurrencies to the minimum, risking less and being sure you will not lose all your funds at any moment.
Conclusion
In this article, we have shared with you just 3 tips to trade cryptocurrencies with margin. This would provide you with a better idea of how to protect your portfolio and be prepared to handle digital assets in a volatile environment.
