Smart investors usually survive every volatility. How do they do it?
Bitcoin soared to the new all-time high of $69,000 on Wednesday. But before investors have time to celebrate, the price of bitcoin saw a plunge to $65,000, which later extended to $62,000. This crash, no doubt, caused millions of liquidations across the markets.
Despite the price plunge, analysts remained positive that bitcoin could reach $100,000 by the end of 2021 and said the correction was healthy to the market. According to analyst Dylan LeClair, the pullback was a result of “a massive increase in BTC margin futures open interest this afternoon (traders going long BTC with BTC as collateral.”
Futures trading, one of the most popular derivatives in the market, is famous for its high earning potential and risks. With leverage, traders can increase their earning potential 10 times, 50 times, or even 100 times. But such high returns come with risks. In wild price swings, traders are vulnerable to forced liquidation. In the following article, we are going to take a look at futures trading and ways to reduce the risk of liquidation.
What is futures trading
Futures, also called futures contracts, is an agreement to buy or sell an asset, such as a commodity, a financial asset, and a cryptocurrency, bond at a predetermined price at a specified future time. In Bitcoin futures, the contract will be based on the price of Bitcoin, and traders can speculate its price and earn money by longing or shorting it.
Assume we use 1 BTC to open a long contract when Bitcoin is trading at $60,000. With 100x leverage, we can open a position worth 100 BTC using funds borrowed from the trading platform.
When the price of Bitcoin increases to $66,000. The profit will be ($66,000 - $60,000) * 100 BTC/$66,000 *100% ≈ 9.09 BTC.
Tips to avoid liquidation
- Tip 1: practice makes perfect
New to the market? Too many complicated rules? Always remember to choose an exchange with a demo account so you can improve your skills. With the demo account, you can practice as much as you like and try out different strategies. Moreover, by familiarizing yourself with trading, you learn to control your emotions.
- Tip 2: trade smartly with your smart-phone
Nowadays, smart-phones are a daily necessity and mobile applications have developed so fast that many of them are as full-featured as their desktop counterparts while being far more convenient.
The real-time notification helps users monitor the market fluctuation 24/7. This could keep you updated while taking your mind off the stress temporarily. In such a volatile market, this could very well be the life-saver of your funds.
- Tip 3: always set a Stop-Loss
Owing to the high level of volatility of the crypto market, a stop-loss enables you to lower the risks of forced liquidation. When you set a stop-loss, once the market price reaches the preset triggered price, your positions will be automatically closed and be traded with the optimal market price available at that time. Losing is common for traders, but knowing when to quit is a win in itself.
Maximize profit with Bexplus
Bexplus offers 100x leverage in BTC, ETH, DOGE, ADA, and XRP futures contracts. Bexplus is trusted by over 800K traders around the world, including the USA, Japan, Korea, and Iran. No KYC, no deposit fee, traders can receive the most attentive services, including 24/7 customer support.
- 10 BTC to practice trading
Bexplus users can get a demo account to simulate the real trading environment and strategy with 10 BTC. You can practice trading skills and learn about how to analyze the market trend with the trading simulator. Even if you make wrong predictions and analyses, you will not lose a penny.
- BTC Wallet: up to 21% Annualized Interest Without Any Risks
Bexplus users can gain profits not only from trading. Join the Bexplus wallet, you can earn up to 21% annualized interest without taking risks. With up to 21% annualized interest, it is no doubt one of the most profitable rates in the industry. While most lending platforms require traders to deposit at least 1 BTC, traders can make a deposit starting from 0.05 BTC on Bexplus.
- Trade Freely on Android & iOS
The top-ranking Bexplus app integrates all the necessary functions and tools (real-time charts, a variety of indicators, news alerts, etc.) while keeping a minimalist and intuitive interface. With the Bexplus app, you can manage your account anywhere and anytime you want. Furthermore, the 24/7 notification could keep you updated with big price movements, making it easier to secure your positions.
Download the Bexplus APP on the Apple Store and Google Play.
Fortune favors the brave, if you are ambitious to earn more bitcoin, don’t hesitate to join now and claim your 100% deposit bonus!
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