Leverage: When They Forget It's A Two Way Street
Source Crypto trading has evolved over the years. What used to be just about spot trading has gone on to include different forms of trading. One being futures contract.
Futures started in the later part of 2017. Two years after I got to know what crypto currency trading actually was.
Prior to futures trading, you could only spot trade. Futures contract opened up opportunities on how you trade the Crypto market. Traders could do more and exploit the market more. With futures one can take advantage of prevailing market conditions.
Unlike your regular spot market, one could now make profit irrespective of the market being bullish or bearish. For so many crypto traders this was a game Changer. When you also consider the fact you could magnify your returns as high as ever, it makes it all the more tantalising .
However, sampling some opinions, one would discover that so many people are scared silly of trading futures. As a matter of fact so many people have gotten their fingers burnt despite the immense benefits available. This is understandable.
Futures trading is one high risk type of trading,high octane if you wish. Most especially if you are a high roller.
Funny enough, for knowledgeable traders, it is one of the easiest ways to make money off the market. For most people, it is the real deal.
As earlier pointed out, one big plus, and why so many choose futures, is the opportunity available in any market condition. With futures, it does not matter if price is going up or down, you can profit both ways. It gives you the option to long or short the market, as per your expectations.
Another thing is the opportunity to magnify your returns on your trades, by the use of leverage. I have read about and seen people make a return of hundred times there investment in the shortest possible time by the use of high leverage. This though is of high risk.
On the flip side, one major disadvantage is the risk of loosing it all,which happens all of the time,especially for newbie traders. I have seen where people go from 100 to 0 in matter of minutes. The reality of losing your money is as high as anything.
The fact is, people fail to realise one thing, Leverage is a killer. It is a two way street. Source The value of a potential gain is the same value of a potential loss, if it goes against you. If I go 20x leverage on a trade, technically I could win or lose 20x on my position . People only think of winning.
Now just because I could use all the leverage I want does not mean I should. Doesn't make sense. Especially as a newbie in futures.
Most people see futures, even spot trading as a get rich quick investment. Which unfortunately, doesn't always work out that way.
Yes, many people get lucky, make a fortune from trading. Truth is, records shows more people loss their savings than they win.
Trading, be it futures, spot or forex, needs time and patience. Above all, proper risk management helps, as a basic tool for successful traders.
Using unnecessarily high leverage negates this. Like someone once said "greed is a killer" and doesn't always make you a success.
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