Cryptocurrency trading implies many different strategies that help traders profit in different market conditions. Trading is not only when you buy cryptocurrency at a low rate and sell it when the price skyrockets. It is also about making a profit when the market is moving down.
Crypto trading strategies also allow multiplying your initial investments due to margin trading. That is, if you have just a little money but you are sure that the asset’s rate will grow, you may “borrow” funds on a crypto exchange and invest a much larger amount. Thus, you have all the chances to multiply profit.
Most credible cryptocurrency exchanges enable margin trading:
The Essence Of Margin
Suppose you have $100 and are confident about the further asset’s rate movement. Then you can borrow funds on a crypto exchange and add a few zeros to your initial investment ($10 000). Thus, investing $10 000 instead of $100 means your income will receive a couple more zeroes. You either borrow from the exchange’s reserves or other users, who “lend” their funds for interest.
Cryptocurrency exchanges offer variations of leverage (the number of “X” added to your amount), that is X5, X10, X30, X100.
Thus, having $100, you can open the position for $500, $5000, etc. The more leverage you pick, the more you risk. For example, you have $100 and choose a leverage of X100, so you open the position on $10 000. If the asset’s price moves not in the direction you forecasted but the opposite, you lose funds. Even if the price fluctuation is only 1%, the exchange will close your position automatically, and you lose your initial $100 investment.
Similarly, it works in the reverse direction: if the price changes according to your plan, even a 1% from $10 000 fluctuation will bring you a lot of gains (you automatically receive $100). If you opened a position on $100 without leverage, you would receive only $1 in this case.
So you can see the benefits of margin trading as well as the risks of this type of training. It is recommended to pick small leverage first. You can also practice margin trading in a demo account on the WhiteBIT platform.