Bitshares -how to avoid margin calls

What a wonderful time to be alive! I love it! Yes, I actually like the downturn. It is a opportunity in my view. Bitcrab (one of the major holders of 'shares) might be of another opinion. He has bet against fiat for a long time now and is massively short. Consequently, he is facing margin call. A not so pleasant experience. But how do you avoid it?

The absolutely failsafe method

Don't fucking margin trade!

It might sound obvious since it is so easy. But sometimes the hardest thing is to resist rash decisions. Be diciplined!

Yes, it is that easy to take a loan with bitshares. You can get everything from dollars to gold and even bitcoin with a click of a button. In fact this is how the "Bit.xxx" assets are made.

Bit-assets are very useful for the trader. Many of them has a fixed value that tracks real world assets like dollars, euros, gold and silver. Excellent when the crypto space crashes.

To avoid all risk with these tools, buy them. Preferably when the crypto market booms. Or to get away from the volatility when you are uncertain. They are perfectly safe to hold and you are guaranteed to get the settlement price if you want to get rid of them. Even without buyers.

Margin trading with a safety net

Ok, so you are curious how to use this tool. The first thing you need is bitshares. And then: a plan. Because eventually you'll have to pay it back. And you will be force settled if the value of your collateral falls under a certain ratio to what you loaned. The details about this ratio varies, but is usually 1,75.

So if you have 1 750 bts, you can in theory borrow 1 000 bitUSD, assuming BTS=$1. It might work. But you would get a margin call right away if bts drop just a little. So it wouldn't be very practical. But it could work. No guarantees though. (Don't even try)

So instead of borrowing a thousand, 200 would give plenty of headroom to play. And time to execute.

Then the plan. It might be tempting to short usd since you get many bts for doing so. And it is a good plan in certain circumstances. I have done it myself with huge success. I had no prior experience with shorting and it was a bit weird. But I soon got the hang on it and took small profits to mitigate the risk. The main factor you rely on is the value of bts, so this is suitable when the price of bts is low. Determining when that is is up to the trader. Personally I look at fundamental factors, others look at technical analysis. The main thing is that you make up your mind beforehand if it's time to short or to hold.

Reducing the risk

Trade against "safe" assets!

By safe, I mean assets that keeps value regardless how the crypto market develops. Here are a few ideas:

• bitUSD:bitHERO
• BitUSD:BitCNY
• BitUSD:HERTZ
• BitUSD:bitGOLD

I used BitUSD in these examples, but it could just as well be BitCNY. I prefere these, since they have predefined markets and plenty of possible (and impossible!) trading pairs. Choosing BitEUR would impractical. Though it can be done. It can even be very profitable.

• Monitor your trading daily or preferably all the time. This is the most annoying thing about margin trading. Be prepared to make adjustments.

• Use a high collateral ratio. I set the ratio to six every time I make a new loan. Just to get my beauty sleep. It doesn't leverage much, but sleep before trading!

• Make a exit strategy if you need to get out of your position. This could be as simple as just using 1/3 of your bts as collateral. Very conservative. It could also be to hold some stable assets like gold, hero, etc as backup. Personally, I have hero for this purpose. In addition other cryptocurrency that can be sold for more bts if needed.

• Hold the portfolio in open orders. You never know if you get some dirt cheap deals or some massive profits by putting in some real long buy/sell orders. Evaluate these periodically.

• Make a plan beforehand! But exit if it was too ambitious! Calculate the arbitrage profit before entering a trade. Evaluate where the market is heading daily.

• Pay back the loan! It is very flexible and not even the most hard core can be on top of the situation all the time.

Simple?

No, it's not.

I just encourage to learn to use the tools in a manner that gives the greatest flexibility. That said, I think way too many overestimate their ability to judge the possibilities and risks regarding margin trading. I even think many should stay away from that borrow button. But that's me. It is free for all to loose money.

It certainly is a wonderful time to be alive...

Have fun and trade safe 🤗