When diving into the crypto universe, many people discover crypto trading but are unaware of its potential risk.
In contrast to e.g. stock markets, crypto markets bring the chance to gain a tremendous amount of profit in a short period of time.
This is due to the high volatility of the markets, which makes it possible to double your investment or even lose everything with a snap.
While many people invest in coins with a low value to sell them at a higher price in the future, there are also possibilities to gain huge profits with altcoins even with a 1$ investment.
One of these possibilities is to trade with leverage, which is already known in stock markets or forex trading.
What is leverage trading?
Leverage trading means that your position in trade is "leveraged" up to 100x by borrowing money from other people with interest or in the case of crypto exchanges like phemex or ByBit, to "fund" the opposite trading position. These funds are changing between long and short positions every 8 hours.
In the case of 1$ and 100x leverage, you would trade with an amount of 100$. But as good as it sounds, the leverage is also applied in the opposite direction and could mean a total loss with only -1% fall.
To avoid these kinds of losses it is important to keep these things always in mind :
1. Don´t invest, if the market is volatile or not changing at all
One of the first things new traders need to learn is the right moment to invest. Thoughtless investing without a concrete vision of the market development is one of the most mistakes, new traders make.
It is important to always keep an eye on rise and fall and to react directly, if the direction of the graph changes in the opposite direction.
With no rise or fall whatsoever or only a small up and down, investing should be reconsidered.
No need for greed
Trading with leverage also makes us think that we can turn some small amount of money quickly into thousands of dollars.
Even though this might be the case in some people, a better strategy is to keep your expectations low, with a concrete stop limit and even take profit.
5 times 20x leverage can sometimes be better than one time 100x.
This also increases the liquidation price (where you loose almost everything without a stop loss).
Trade with that, which you can loose
Trading with a huge amount of money can sometimes stimulate your brain activity in the same way as gambling.
With a full load of dopamine and serotonine, you quickly think, that you can get your lost money back quickly.
But that's not how it works!
Investing in the same market conditions where you lost your money will mostly result in a loss again too.
Sometimes Its just better to wait for the perfect market.
All in all leverage trading is a great opportunity but can come with a big surprise in either the one way or the other way.
