Read on Twitter
Thread → Cryptocurrency Derivatives & Leveraged Margin Trading
As most people just post ref.-links here regarding this matter, without ever explaining wtf it is about or what risks there might be, here we go!
As most people just post ref.-links here regarding this matter, without ever explaining wtf it is about or what risks there might be, here we go!
What are derivatives?
→ Derivative = financial contract between two or more parties based on the future price of an underlying asset
→ One of the most popular financial instruments
→ Value of the contract is determined by changes or fluctuations in the price of one asset
→ Derivative = financial contract between two or more parties based on the future price of an underlying asset
→ One of the most popular financial instruments
→ Value of the contract is determined by changes or fluctuations in the price of one asset
What is the purpose of derivatives?
→ Hedging/protection from price fluctuations
→ Speculation on future prices of certain assets
→ Especially in the cryptocurrency sector it's main purpose is rather speculation
→ Hedging/protection from price fluctuations
→ Speculation on future prices of certain assets
→ Especially in the cryptocurrency sector it's main purpose is rather speculation
What are perpetual contracts & futures?
→ Futures: Contracts obligating the buyer to purchase an asset (or vice versa) to a predetermined future date and price
→ Perpetual: Contracts similar to futures without expiration date or settlement, can be held or traded any time
→ Futures: Contracts obligating the buyer to purchase an asset (or vice versa) to a predetermined future date and price
→ Perpetual: Contracts similar to futures without expiration date or settlement, can be held or traded any time
The amount of derivatives for #Bitcoin 
and other cryptocurrencies has exploded over the last 2-3 years. A great overview you can find on @coingecko:
https://www.coingecko.com/en/derivatives
and other cryptocurrencies has exploded over the last 2-3 years. A great overview you can find on @coingecko: https://www.coingecko.com/en/derivatives
What is leveraged margin trading?
→Trading with leverage allows you to open a position that is larger than the original stake. The borrowed money is called "margin"
→Leverage is a very powerful tool because it can increase your profits, but it can also maximizes your losses
→Trading with leverage allows you to open a position that is larger than the original stake. The borrowed money is called "margin"
→Leverage is a very powerful tool because it can increase your profits, but it can also maximizes your losses
Example:
→ You want to put $1k into a #Bitcoin long position with x5 leverage
→ Effectively you are trading with $5k now
→ If you close this position at +10% BTC price you make +$500, not +$100
→ You want to put $1k into a #Bitcoin
long position with x5 leverage→ Effectively you are trading with $5k now
→ If you close this position at +10% BTC price you make +$500, not +$100
On the other way you are facing a liquidation of your position when the price goes into the 'wrong' direction.
Over 80% of all traders will lose in the long term. It is a dangerous game that you play against very smart individuals and algos. Don't expect to win directly.
Over 80% of all traders will lose in the long term. It is a dangerous game that you play against very smart individuals and algos. Don't expect to win directly.
To be a profitable trader, and most here will second this, you have to make mistakes first, period. And not everybody is made for being a potentially great trader.
However: When you are experienced in trading spot since a longer time already or want to check it out at all, I am trading #Bitcoin most times on ByBit.
Always reliable, great 24/7 support & even altcoin derivatives.
Feel free to use my ref.:
http://bit.ly/ByBit1337
most times on ByBit. Always reliable, great 24/7 support & even altcoin derivatives.
Feel free to use my ref.:
http://bit.ly/ByBit1337
