The Understanding Of Cryptocurrency Position Trading Part Finale

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Good day fam,

It is your humble friend again @mato445 and I hope everyone is doing fine.

I am happy to be here in this great community to make post and interact with members of this community.

Today family, we shall be gaining knowledge on the disadvantages of position trading in the cryptospace, and I will be hitting the nail straight on the head, please follow along as we embark on this journey.

Dis-advantages Of Position Trading

Position trading like every other popular trading strategy has its advantages and dis-advantages.

And in our discussion today, we shall be focusing on some challenges of position trading.

• Market Volatility:

One of the major dis-advantages of position trading in the cryptomarket is as a result of market volatility.

One identifying mark of cryptocurrency is its price flunctuation and this can be very unpredictable and extreme.

The aim of position traders is to hold a cryptocurrency pair for a long period of time, hereby capitalizing on long term trends.

The volatile nature of the cryptomarket however, can lead to substantial and sudden price movement, thus creating a risk for position traders.

• Lack Of Regulation

The lack of regulation of the cryptomarket plays a substantial role in contributing to the risk of position trading.

Cryptocurrency as we know operates in a regulatory free environment,and this absence of regulation can lead to fraud, price manipulation and other illegal activities that could significantly have effect on position traders.

Without the presence of regulations, position traders will find themselves more vulnerable to fraudulent schemes, price manipulation etc, which may be very dis-advantageous to those making use of this trading strategy.

• Price Liquidity:

Another dis-advantage of position trading in the cryptomarket is the liquidity of cryptocurrency in the market.

Some cryptocurrency may have lower trading volumes, especially the less popular ones or the smaller ones.

Low liquidity in the cryptomarket most oftentimes lead to slippage and a higher bid-ask spread, hereby making it a challenge for position traders as their orders will not be executed at desired price.

The impact of large trade can be exacerbated by illiquid market and this can cause significant price distortion.

• Susceptibility To External Factors:

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Another primary dis-advantage of position trading is it's susceptibility to external factors.

A wide range of external events affects cryptocurrency, events such as macroeconomic trends, security breaches, geopolitical events etc.

A high level of uncertainty can be introduced by these external factors and this makes it difficult for position traders to react and anticipate to changes in the market.

A security vulnerability or sudden regulatory announcement of a popular cryptocurrency can lead to unforeseen and swift market changes, thus affecting the position held by position traders.

Conclusion

While there are lots of long term gains associated with position trading, there are also some dis-advantages associated with it.

These dis-advantages include volatility, technological challenges, regulatory uncertainties, liquidity concerns etc.

Inorder to be profitable in the cryptomarket, traders who make use of position trading must carefully consider and manage these risks.

As we proceed, we will learn about more interesting cryptocurrency topics.