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Cryptocurrency has transformed finance in countless ways, but if you are a retail trader like me, then you’ll be acutely aware of how much the industry has changed to accommodate the rise of leverage trading. Now, while this doesn’t come without its opportunities, leveraging trading is a risky form of investing whereby users could potentially lose all their funds. So, yes, there are certainly elements of it that are problematic as well.
However, as the overall market cap of the cryptocurrency industry sails into multi-trillion-dollar valuation, there’s a greater demand than ever. A growing number of retail traders are seeking to access the tools and platforms that have historically been available only to institutional investors on Wall Street.
Although these were investment banks and asset management fund managers that accessed conventional markets, such as forex and commodities, the rise of cryptocurrency has flipped this old dynamic on its head.
The rise of the internet has brought numerous new industries to the forefront in recent decades. For instance, in the world of poker, it’s a market that has evolved from a popular, conventional setting to a multi-billion-dollar online variant, which has key distinctions from the card-based classic. In fact, you could make the argument that conventional poker and online poker are two completely different games entirely.
Given that the iGaming industry is one of the most innovative and forward-thinking, it has been integrating cutting-edge fintech into its sites for the best part of 30 years. Cryptocurrency has become the latest development to strike a chord with online poker fans, with www.ignitioncasino.eu/poker one of the many sites looking to merge the transnational popularity of poker with the international appeal of cryptocurrency.
Although there are ways to improve at poker quickly and pick up the basics, as you can see in the link below, the importance of knowledge and expertise cannot be overstated. You should not play poker or trade cryptocurrency if you do not have a firm understanding of the market and the risks involved.
Both leverage trading and online poker gaming carry financial risks, which is why it is important to only use money you can afford to lose, and ensure that you are risking money that you are not relying on.
The cryptocurrency market is split into two categories: institutional and retail. Retail trading falls into a category of smaller traders, like you and me, and institutional investors are typically those with millions of dollars at their disposal at any given time. Given that 90% of retail traders lose money in the cryptocurrency market, leverage trading carries even greater risk.
The way leverage trading works is that you invest a small amount of capital, while the platform you’re on funds the rest. If you enter a 10x leverage long position, this means that a 10% increase in the asset will provide you with 100% profit.
However, the flip side is that if it drops 10%, then all of your capital is absorbed into the market. Some traders will enter a short position, which is the same example in reverse. If a price drops 10%, then you make a 100% profit, but if it increases 10%, your capital is gone - and the buildup of shorts is what is commonly known in the market as a short squeeze.
It’s a stark contrast to spot trading, where you don't actually incur a loss until you sell the asset. It’s near-impossible to get liquidated, especially if you are trading the prominent tokens, but you need to embrace volatility and hold onto your assets for years at a time before you begin to see significant gains, but they are not always a guarantee.
Spot Or Leverage?
Ultimately, you should not use professional trading tools, such as perp contracts or leverage, unless you have a firm grasp of how they work. Many retail traders don’t, and those who do have been in the market for close to a decade, usually starting off by incurring substantial losses.
Trading, even in spot positions, is a difficult practice to make profitable. It is time-consuming in a 24/7 market, generates stress, and even if you have been chipping away and making a profit over the course of a few weeks or months, it can all unravel from one or two bad trades if you do not have the mentality, risk management, or emotional control to weather the turbulent nature of the market.
The first step is to find resources that provide a comprehensive breakdown of leverage trading. You must spend hundreds of hours researching it, understanding how it works, listening to experts, and grasping the risks before considering it. Despite the opportunity, there is also a significant risk, and if you do not understand this or underestimate it, you could end up in trouble.
Disclaimer
The information on Coinsniper is user-generated and not verified. Coinsniper does not provide financial advice or facilitate transactions.
Also note that the cryptocurrencies listed on this website could potentially be scams, i.e. designed to induce you to invest financial resources that may be lost forever and not be recoverable once investments are made. You are responsible for conducting your own research (DYOR) before making any investments.
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