In this article, we will analyze the opportunities and risks associated with the use of leverage on the cryptocurrency market. If you have not met the term of financial leverage so far, I recommend reading the previous article in which I am trying to explain clearly what financial leverage is and how it works. At the very beginning it is worth remembering that leverage is a tool used mainly by FOREX market players. The foreign exchange market differs significantly from the cryptocurrency market, starting from volatility and ending with regulation. The conditions prevailing in the cryptographic currency market make using leverage even more difficult and more risky than in the case of the currency market, which is why it is so important to prepare well in the context of strategy, psychology, capital, etc. before any attempt to invest using this tool. Certainly there will be a lot of articles that will provoke reflection on people who want to start playing with leverage on BTC or other cryptocurrencies, but now let's get to the bottom line.
Chances of using leverage.
Leverage is a tool that allows you to multiply our capital in a very short period of time to a very large size. You do not have to have a large contribution, because the size of the lever we choose, for example, 1: 100 or 1:10 allows us with a contribution of, say, 1.000 USD, play as if we operated with 100,000 USD or 10,000 USD. It gives a great opportunity for people whose financial capabilities would never allow them to control positions with such values. The lever makes it possible to multiply our capital many times in a very short period of time, which is especially tempting for beginners and seems "beautiful". The volatility we have on cryptocurrencies is added by dynamics, because if the BTC variation is 10 times greater than gold variation, opening the lever on BTC with a leverage of 1: 100 borders gambling, to make the reader aware of the scale of dynamics with which we are dealing.
Such a large variability allows also to develop an appropriate strategy, which while maintaining discipline and patience can bring positive results. There are many platforms on the market that allow us to open a position on contracts based on bitcoins, but differ in features and functions. Personally, I use the Bitmex platform, which allows you to open positions in BTC and free payment and withdrawal in this cryptogram. This saves a lot of time and is more convenient for the average user. The risk associated with the use of leverage limits such functions as "stop loss" or "take profit" ...
Threats related to the use of levers.
We told ourselves about the opportunities that financial leverage gives us, but the time has come to face reality. You should be aware that using leverage as a tool that brings profit from investment is a very difficult art. Many people seem (especially at the beginning) that they have discovered a money making machine, which always heightens the mindless opening of a few items at the beginning, which paradoxically bring a large ROI, but the trap approaching always works in the same way ... first gives hope and then brutally takes it, leaving us to say goodbye proverbial "punch in mouth." I am not writing to discourage or demotivate someone, but I want to realize that, unfortunately, there is no place for an emotional approach to the market, profit calculation, as in a business model or dreams of being a trader who drives a Ferrari and puts photos on an instagram after reading a few books and items ... I would ask you to be immune to this type of marketing, because it is the attraction of sheep who are naive and believe it. Surely this information is clear and logical for many people, but I believe that it will allow you to cool the emotions of some people, which will save their money, time and health. Above all, leverage involves the possibility of losing all of the capital we spend. The position that we open depending on the size of the lever, can in a fraction of a second be closed, for example, by the unexpected momentary movement of cryptocurrencies ... Many people do not use leverage, either succeed or not, which is one of the worst possible approaches, because it is unproductive and thoughtless we lose our time and chance for good results in the long-term perspective. Many people dedicate capital from which they can not later reconcile, which is another elementary mistake.
Leverage is very dangerous, can have a very negative impact on the psyche of a person who uses it inappropriately, this person is capable of falling into various extremes, reminiscent of gamblers' behavior, such as a quick desire to make up for losses, emotional problems due to lack of opportunity and willingness reconcile with loss, relying on happiness, faith in bad luck and many other nonsense that are very harmful. On the basis of what I wrote, someone who has never used leverage can say that there is not even a sense to take it, but each stick has two ends ...
Summary
I deeply hope that the knowledge contained in this article will help some people, look more broadly at the element of leverage use. I will also point out that it is impossible to discuss the whole issue in such a short form of communication, which is very broad and certainly not be closed to knowledge from one source and many should be used, it is worth verifying their credibility. In order to invest effectively with the use of leverage undoubtedly, you need knowledge and experience that turns out to be invaluable in many situations. The concept of knowledge consists primarily of strategy, understanding of market mechanisms and leverage itself, which is the basis. Another important element on the component of knowledge is knowledge of psychology, which includes control of one's emotions, appropriate time and means management, etc. Leverage articles will surely appear, still a lot with practical examples so that the reader does not have the impression that he absorbs only dry theory. The lever is a tool to pay attention to, because with a rational approach in my opinion it is a very interesting and attractive alternative to investments in cryptocurrencies themselves.
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