Any investor looking primarily for flexibility in managing his portfolio will appreciate the solutions that derivatives trading brings. Trading with the use of a derivatives allows you to take full advantage of all the opportunities offered by the cryptocurrency market. This type of investment, although highly profitable, is associated with increased risk. In many situations, it is worth considering whether we should use this solution.
Therefore, if you do not know how to earn money on leverage or how to make a profit on derivatives trading — this article will introduce you to a few rules that you should follow.
How to make money on leverage?
To understand the principles of earning on derivatives trading exchanges like Geco.one, you first need to know how it works and leverage and derivatives trading. We have covered both of these topics at length in our previous articles on these topics.
Derivatives trading and financial leverage — tips for beginner investors
As with many other investments, it pays to know what you are investing in before buying the asset. In the case of derivatives trading, it is essential — here, a lousy investment can result in high losses. It is much easier to use leverage when dealing with more stable cryptocurrencies. Chasing a short-term trend can turn out to be drastic.
Professional investors usually recommend holding positions with a margin for a short period. It’s primarily related to price fluctuations and recurring commissions on the cryptocurrency market that exchanges charge for an open position. However, monitoring these variables over the long term requires a great deal of attention.
Watch out for liquidations
One of the most significant risks associated with leverage operations is the liquidation risk. Liquidating your position at the wrong time or losing your entire deposit due to insufficient funds can turn out to be an unpleasant lesson for a novice trader.
When to close a position?
This point applies to both profit and loss situations. If you’ve managed to profit on one of your positions, don’t be too greedy. Set the target for a specific price at which you want to close your investment — both loss and profit. One of the fundamental mistakes novice traders make is holding positions for too long.
Whichever investment method you choose, it’s always a good idea to test it first. Each time you select a new trading exchange, make sure you understand its interface well and that you can navigate safely. Then use a small portion of your funds to understand how derivatives trading works. The Geco.one exchange is a great place to test the method of leveraging trading in a safe and intuitive environment.