Errors of Crypto Investors. Error 5

Engage in margin trading

Marginal trading is one of the most profitable, but at the same time the most risky strategies for crypto traders. This strategy is suitable only for experienced players who are ready to incur large financial losses.

In margin trading, a cryptotrader takes a loan from a broker, in whose face the exchange is most often a loan, by providing the amount of the collateral – the margin. At the same time, interest is charged for using the loan. Thus, a cryptotrader can invest in a cryptocurrency in excess of the balance.

There are two main variants of margin trading: it is a long position, or a game for raising, when the trader puts the fact that the crypto asset will grow in price, and a short position, or a game for a fall, when the rate goes to the fact that the price for cryptocurrency will decrease. However, if the price of a crypto asset seriously goes down while trading on the rise, then when it reaches a certain critical point, the trader can lose all of his deposit due to margin call – forced closing by the broker of the transaction, if the trader has not added funds to the account. If the borrowed funds are under threat, the exchange has the right to deduct the loss from the deposit of the trader’s margin account.

There are cases when traders, who for the first time had to face serious losses, decide to raise rates and win back their positions instead of accepting losses. Which often leads to even greater losses.

Errors of Crypto Investors. Error 4                                     Errors of Crypto Investors. Error 1

Write: Richard Abermann


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