Understanding of the risk of commerce with Margó: guide to the investment of cryptocurrency
While the world of cryptocurrencies continues to grow and mature, the trade in these digital devices is becoming increasingly popular. However, an aspect of the cryptocurrency investment, which can be particularly more risky, is the use of margin trade. In this article, we are immersed in the risks relating to margin trade, explore how they differ from traditional investments and damage to investors to relieve them.
What is margin trade?
Commerce coverage includes the purchase of cryptocurrencies or other digital devices at a higher price than you usually pay without lending money from a broker. When using the margin, you can practically lend part of your capital to buy activities that are often very volatile.
In relation to cryptocurrencies, the use of the margin means that multiple coins or chips are borrowed from if you buy it directly. This can increase its potential performance, but it can also show significant losses if prices decrease.
Risks relating to the coverage trade
There are many risks that investors must be aware:
- Risk of liquidity
: If you are unable to sell your wealth quickly and at affordable prices, it is possible to have liquidation commissions, which can cause significant losses.
- The risk of margin called
: If the value of the activities drops below a certain threshold, the broker will have to put more money to cover the deficit.
- Credit risk : If you are unable to reimburse the funds borrowed, you can lead to cover calls, which could lead you to sell your activities for loss.
- Risk Corsersy : negotiation on the margin means that another side (for your broker) is based on the fulfillment of their obligations, which can be more risky than traditional investments.
How the margin trade is different from traditional investments
The margin trade is significantly different from traditional investments:
- Risk of higher losses : potential losses increase during the coverage trade while borrowing money to buy additional activities.
- The increase in volatility : the value of cryptocurrencies can flow rapidly, which means that low price movements can also involve profits or significant losses.
- No market lesson : Unlike traditional investments, where you have determined hours of commerce, Margini trade allows you to trade 24 hours a day.
To relieve the risks of the coverage trade
In order to minimize the risks relating to the margin associated with cryptocurrencies:
- Diversify your portfolio : distribute your investments to different classes of activities and cryptocurrencies to reduce the exposure of each market or activity.
- Understand your risk tolerance : Be aware of your level of comfort with risk and consequently change your trading strategy.
- Use arrest leaks : Sets the stop orders to limit possible losses if prices download significantly.
- Choose a reliable broker : examine the reputation of the broker, commissions and risks management systems before engaging.
- Observe your portfolio regularly : observe your investments and set your strategy as needed.
Conclusion
Trading with margin can be a high -risk strategy for investors who do not know the market or lack the experience of cryptocurrencies. While offering potential prizes, the risks relating to margin trade should be carefully considered before investment decisions are made. By understanding Margini’s risk of trade and taking the measures to mitigate them, you can make a well -founded decision and potentially increase the chances of success.
More sources
Further instructions to invest in cryptocurrencies are recommended for the following resources:
* COINDESK : one of the main online publications containing news, trends and analysis of the cryptocurrency market.