Crypto Academy Season 2 Week 4 Homework Post for (@stream4u) - Crypto Margin Trading & Crypto Leveraged Tokens Trading.
It has been a good lecture again this week, and I must say, I keep on learning new things. In this week’s lecture delivered by professor @stream4u, I will write my post for the homework on the topic; Crypto Margin Trading & Crypto Leveraged Tokens Trading.
Crypto Margin Trading
Cryptocurrencies have come a long way to provide interested traders/investors with a lot of trading options and opportunities. One of these trading options include Margin Trading
Margin trading also involves predicting the price of an asset in a very short period(5-15 minutes). In this type of investment, the trader goes in with an initial amount of money and it is then leveraged with additional money which comes in the form of ratios. In simple terms, an investor brings in a small amount of money and it is multiplied 2x,5x,10x or even more. This usually leads into trading with huge sums of money. The higher the ratio you pick, the higher the risk involved and vice versa.
There are two possible outcomes in margin trading, you can either gain profit or bear a loss. This is why there is risk involved when choosing your leverage ratio.
Let’s take for example; Assuming an investor enters the trade with an initial amount of $200 and decides to go in for a leverage ratio of 10x, then he’ll be getting a starting capital of $2000 to open a trade.
Now suppose you predict that there will be an increase in a coin and the coin increases by 10%, this gives you 100%(10x10) gain on your investment. But if your prediction is wrong and the coin price decreases by 10% then you’ll get a loss of 100%(10x10). Meaning you would have lost all your money in the investment.
This shows that you can either make a profit of 10% percent or a loss of 10%.
With all this, I would like to suggest that you go in for small leverages in other to minimize your risk of losing money you can’t afford. Also when you are able to accumulate small amounts of profits then you would have a good trade.
How To Plan For Trading In Crypto Margin Trading.
Before a trader enters such kind of trade, there are some guidelines the person need a to follow in other to be successful in such trades. Below are some key points to note:
- Always make you sure you have understand what type of trading you are entering and what it is all about before you start any trade. Without any experience about the trade, one may just be gambling his/her money.
- The investor should also a open trade with an amount of money he is comfortable with. This is to say, do not enter the trade with an amount of money you can not afford to lose.
- Also investors should not be greedy when trading on such platforms. With the little profits gained, always try to exit the trade when it is necessary and do not always rely on too much profit. In short, our position in the trade should be short.
- Due to the fees/commissions involved in the profits made, choosing exchanges or markets with lower fees is important here.
- The investor should go in for high volume exchanges.
Crypto Exchanges Name That Provide Margin Trading Service and What Margin They Provide?
|CRYPTO EXCHANGE NAME||MARGIN THEY PROVIDE|
|Poloniex||Provide up to 2.5x margins for cryptos with local capitalization.|
|FTX||Up to 100x margin|
|Binance||Cross mode 3x, Isolated mode 10x|
|Houbi||Provide a margin of up to 5x with low leverage rates|
|StormGain||Provides a margin of up to 200x|
Leveraged Tokens Trading
This type of trading provides the opportunity to gain more interest than loss. It was later introduced after the creation of margin trading in order to remove the difficulty in margin trading.
In this type of trade, the investor can gain profit from both the rise and fall of the price of an asset by making the right prediction.
Tokens form this trade is given out to investors by a margin and these margins may be up 3x or more. This margins determines the profit or loss you make.
For instance if you are given a margin of 3x and you predict the fall or increase of a coin correctly and it falls by let’s say 20%. The profit you would have gained will be 60% (3x20%) of what you invested.
Leverage tokens are of the form up/bull and down/bear.
An example of leverage token on Binance is The BTCBULL or BTC/UP for increasing trend and BTCBEAR or BTCDOWN for decreasing.
Binance Leveraged tokens cannot be withdrawn to our own wallets since the leveraged tokens are ERC20 based tokens.
HOW TO PLAN FOR TRADING IN LEVERAGED TOKENS
- Just as in margin trading, there is risk involved in leveraged tokens trading. So always trade in small amounts.
- Do not be greedy when trading. You should know when to exit the trade when you have made much profit.
- Try and trade with small leverage options to reduce the risk of losing all your money.
- Choose reliable exchanges and with low commissions.
- We should make critical analysis of chart patterns before entering the trade.
Crypto Exchanges Name That Provide Leveraged Tokens Service and What Margin They Provide In Leveraged Tokens
|CRYPTO EXCHANGE NAME||MARGIN THEY PROVIDE|
|Coinbase||Up to 3x leveraged tokens|
|FTX||Up to 3x leveraged tokens|
|Binance||From 1.25x to 4x leveraged tokens|
|Houbi||Up to x5 leveraged tokens|
|Bittrex Global||Up to 3x leverage|
Price Forcast For Crypto Assets XXXXXX. (This is similar question from last course, take any Crypto Assets Chart graph, as per its current price and its market trend predict its future price for only next week, what will be its future price for next 1 week.You can predict for any direction up or down but explain it properly on what basis you have predicted the price. What will be the possible low level and high level for next week.).
Predicting the price for ETH in the coming days.
Current Price: $3,450.90
Looking at the chart above, the price of ETH as at 30th of April was $2,759.93 and the volume of the ETH in the crypto market was around $31,916,594,546. In this few days the ETH coin has been increasing day in day out and breaking its highest level all the time.
During the last few hours of yesterday, it nearly broke the resistance level of $3,600 but because of had sales by some investors it dropped down to a support level of $3,386.12. This would have been a very good time to buy the coin and start investing.
From the above chart, we can see that from the minor support level it has started to increase again. From what I’m seeing, if there is new hard purchases, we can see the coin breaking the resistance level and attaining a market price of $3,600 or more.
My prediction for the price of ETH next week will be around $3,650.
Margin trading can be a very useful strategy of trading if only you have good understanding of how it works. If you don’t have the skills or experience, then you would just be gambling away your money.
Lastly, I want to thank professor @stream4u for such a wonderful lecture. I wish to learn something new every week. Keep up with the good work.
Thank you for reading.