How To Minimize Losses On Bitcoin Margin Trading

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Risk Management

First of all, there is no strategy to prevent losses altogether. So the main thing is to limit losses and therefore risks. Money management is about how much money you should invest in your trades. For example, a 2% risk means that you are willing to lose 2% of your capital in a trade.

This also means that you would have to be wrong with 50 trades to lose all your money. However, this is relatively unlikely. Crypto margin trading is not a game of chance where all your stake necessarily has to get lost if the trade goes wrong.

The amount of your capital that you invest in trading must also enable you to continue to live a relaxed life. So don’t use money that you need for your living. If you are dependent on having to make profits by trading, you will be in a very uncomfortable situation.

Putting everything on one card can also get you into trouble if the price doesn’t move in the desired direction. In crypto margin trading, for example, this means that you should not invest all your money in one coin, but should spread across several coins.

In any case, when you start trading, you have to be prepared to accept losses. Even the most savvy professionals have lost money at the beginning of their trading career.

#1 – Never Use Too High Leverage

limit the leverage you use. Even though many Brokers offers leverage up to 100x this doesn’t mean that you should just take it. With 100% the distance from your entry price to your liquidation price is tiny. So the price may only move a tiny little bit into the wrong direction and your entire stake is gone to zero.

You can prevent that from happening by using a stop loss, but that stop must be even tighter than the liquidation price, so the price has little room for manoeuvre and you might get stopped out and lose a big portion of your stake, although price might turn into the right direction riht afterwards.

Trading Bitcoin on Margin with 100x leverage without any trading strategy is just if you are in a casino. You make your best bet and hope the market moves in the right direction. So better use margin wisely.

#2 – Stop Loss Orders Prevent Total Loss

By placing stop loss orders you can control your losses very well. This means that you don’t have to lose the whole 2% of your bet every time. (if this is your defined risk where you put your stop).

For example, if you have a capital of $1,000 and bet 2% or $20 in a trade, a Stop Loss Order can get you out of the position at a certain price, or as a percentage of the loss, in time to keep most of the stake. This will keep most of your invested capital, even though the trade went wrong.

#3 – Risk Management with a Trading Diary

If you notice that your trades don’t work out in the majority, you have to analyse why. To do this, it makes sense to keep a trading diary in which all trades are recorded with the entry price, expectations, profits and losses, stop loss orders and, if necessary, a description of your emotions during the trade. This sounds a bit elaborate and unusual, but has a high benefit.

If you have set stop losses and have been stopped several times from a trade, even though the trade was still open afterwards, this is because you have placed the stop loss too close to the entry price. Conversely, take profit orders can be set too tight so that trends are regularly not fully exploited. The trading diary provides you with the basis for error analysis and for your future trading strategy.

#4 – More Tips To Avoid High Risk

Here are couple of more tips you can use if you want to avoid trading on margin like gambling and save you from some big losses from the beginning.

  1. Do your homework and learn continually. Make sure you have an in-depth research about the product and market you want to jump into. Broadening your knowledge will provide you a great perspective for various trading situations.
  2. Follow the news. Keep your finger on the pulse of the market to avoid missing out enter and exit points.
  3. Exclude your emotions. BTC margin trading is business, make rational decisions when it comes to enter or exit a trade.
  4. Build and stick to your strategy. Do not just pick entry points blindly, set aside time build up your strategy based on research and testing and execute it along the way to earn your deserved profit at the end.

Enter Crypto Trading on an Exchange

It can be interesting for beginners to trade crypto currency stocks on the stock exchange. GBTC is a trust that owns and sells Bitcoin shares. By buying and selling these shares, no direct investment in Bitcoin is required. The above-mentioned registration with a platform and the wallet are not necessary.

GBTC shares are traded at a premium. This means that Bitcoins are cheaper than buying GBTC Trust shares. Another disadvantage is the trading hours. Crypto Trading is a 24-hour market, whereas the traditional exchange with its fixed trading hours is not.

TIP: If you are looking for comprehensive trader training, you should take a closer look at our training courses. For those who have already gained initial experience but are looking for profitable signals, we recommend the PowerSignale stock round.

Coinbase as an Exchange Platform for Beginners

The easiest place to start crypto trading and buy, sell and store coins is Coinbase. However, you can currently only trade Bitcoin, Ethereum, Litecoin and Bitcoin Cash on this trading platform. If you are serious about trading cryptocurrencies, you will choose another trading place like Bitfinex, Bittrex, Binance or Kraken from Coinbase for more offers and lower transaction costs.

Attention: Residents and citizens of the USA are not allowed to trade cryptocurrency on leverage (derivatives), so the brokers mentioned above on this page may not be used in the US or by holders of a US passport. To find out where US Americans can legally trade crypto read this page.