Today in 2019, a large number of crypto traders have taken a step back and are sitting on the sidelines while they wait for the market to pick up again. While the strategy in bull runs is to obviously go “long” and in bear markets is to go “short”, but what about sideways trends?
Markets in limbo, moving sideways are generally considered the worst condition to make profits, however, they needn’t necessarily be. In forex and equity markets, investors continue to trade every day and this isn’t because their markets are always either rising or falling, they’re likewise often moving sideways.
There is an optimal strategy for each market condition, and for the sideways market - this strategy is Margin Trading.
Margin trading allows traders to open positions much larger, thus more profitable than their initial capital allocation. Consequently, even very small price movements can lead to substantially greater profits.
The best margin trading exchange on the crypto market to date is Prime XBT, with the highest leverage of up to 100x across all of the 5 major crypto-assets offered on the platform.
Let’s compare the same trade with/without leveraged margin trading on a 100x facilitating platform like Prime XBT.
If a trader allocates $1,000 to trade on margin with 100x leverage, their total position exposure increases to $100,000 and their margin is just 1% (1:100). Say the market positively moved by a modest 5%, their profit would be $5,000.
On the exact same trade with no leverage, the position remains at $1,000 and the trader would only profit by $50 (100x less).
As you can see this is a significant difference in the takeaway profits and with the same amount of capital put on the line.
Weighing up the Risk
Trading on margin does increase the risk of losing the trade’s initial allocated capital, because the lower the margin/higher the leverage - the greater the risk of being liquidated as the room for market movement is relative to the size of the margin. What makes this less daunting though, is that less of the trader’s funds are risked in the first place - so the potential of losing it may very well be worth the risk for the potential gains if the trade is successful.
This ultimately comes down to the individual’s risk vs reward calculations.
The amount of leverage utilized is adjustable and optional, it is not compulsory on a margin trading platform like Prime XBT. Rather, less experienced traders are encouraged to start with smaller leverage of less than 10x.
On Prime XBT, risk can be managed in a number of ways:
Advanced Order Types - stop-loss, OCO (one-cancels-the-other), and protection orders can be used to set clear entry and exit strategies, in addition to the standard market and limit orders.
Gearing - using leverage can free up capital that can be committed into other investments. Multiple positions on the same or different assets can be held at the one time, eg. You could long and short the same asset at the same time: in this case, one trade will prevail while the other bombs, but the leverage of the successful trade could very well counteract the other's loss.
Diversified Portfolio - Rather than placing all of your eggs in one basket, invest in multiple assets at one time and on the one platform. This concept carries the same principle as gearing with more options and opportunities to grow your capital faster.
As you can see, sideways trends are certainly not a lost cause. The main limitation facing crypto traders in their efforts to continue making profits in this (and any) market condition is the lack of providers that allow for such advanced trading strategies. The key to success is understanding market trends and technical analysis so that the right strategy can be used at the right time.
As mentioned and fortunately Prime XBT now exists, and is the best place to trade with up to 100x leverage, to go long or go short, and on a secure, reliable, and user-friendly platform.
Other notable features include: super low fees (0.05%), customizable UI, multi-monitor support, no KYC, high liquidity - aggregated from 12 top providers, and 24/7 customer support.
To learn more and start earning all year round, check out: Prime XBT.