Bitcoin has been in a downfall since January. People who got in cryptocurrency late suffered big losses. They did because everybody told them to HODL. HODL until market goes up again. This was a mistake from the beginning. Imagine you bought around 0.5 BTC in January for $10.000 as I write this article your BTC is now worth around $3300.
You lost only because you thought of this as a one way market. While others were making money from BTC's downfall you kept waiting. Now I'll tell you how to use the two way market to protect and to profit with your investment.
Basic Intro to Shorting
If you watched the movie Big Short you must have seen how some people made tons of money from the US House market crash. You could have done that too. It doesn't require a special skill. It's as easy as buying a cryptocurrency.
If you were shorting bitcoin when it was $10.000 you were basically creating a buyer for yourself in the future. And believe it or not, that buyer will buy your BTC whenever you want for $10.000, even if BTC is worth $5000 at the time of that transaction. So when you short, you have 1 BTC for $10.000 and when you close your short while BTC is $5000 you have now 2 BTC or still $10.000. Isn't it amazing? You're still investing money in BTC when it crashes but you protect your initial capital. But wait there's more…
Basic Intro to Leverage
Leverage is basically borrowing money from the exchange for putting in bigger amounts of money in your trade. In our example if you initially had $10.000 and you short 1 BTC with that (because that's the price of BTC at that time) you don't use any leverage. But if the exchange gives you an option to margin trade you can use a leverage of, let's say, 2x. So for $10.000 you actually short 2 BTC that is worth $20.000 in total. Couple of months later you close that short when BTC is $5000 and guess what, your 2 BTC is now 4BTC. You have borrowed 1 BTC from the exchange so you give that back and you have a total of 3 BTC!
Exchanges like BitMEX offer up to 100x leverage so with your $10.000 you can open a position (long or short) for up to 1 Million dollars. But let me say it in advance. DON'T YOU FUCKING EVER DO THAT.
It's simple, if you can make extra extra profits with Leverage you can easily have extra extra losses too. BTC will never go down to zero, but with leverage your investment can hit 0(zero) in an instant.
How to use Leverage and not Fuck up
- You should know your market. You should either know how to read charts and do Technical Analysis(TA) or you should be following people who knows how to read charts.
- Reading charts and TA is not enough on its own. There are other forces in play, like good news or bad news, whales or institutions that can move the prices. So…
- Risk management. If your prediction doesn't play because of some news, like a hacked crypto exchange, all your plans might go south. So you need to put your stop losses or take profits in proper places. There's also another option for protection that is exchange specific and I will mention that in a bit.
- On BitMEX average leverage that is used is 8.8x. I usually use 10x. I try not to use higher leverages because I'm afraid of losing very quick. I'm afraid rightfully so because I've made that mistake several times before. So listen to this guy, don't go crazy with leverage.
- Don't use all your funds at once. Try to open as small as possible and use the advantage of leverage to win like you opened a big trade. If you lose that trade make sure you still have funds left to recover.
So these are the basic rules for leverage(margin) trading. But there are couple of tips that I want to give you if you promise to stick with these aformentioned rules.
There are handful of crypto exchanges for margin trading. I will mention only two that I use. And I believe the are the best two for following reasons.
First of all, traditional margin trading exposes all your funds to liquidation(another word for losing everything), on BitMEX however, you have isolated margin. So if you opened a position with 0.1 BTC out of your total of 0.5 BTC in BitMEX, in case of liquidation you only lose that 0.1 BTC and not all of your funds. So this is why I told you to open small trades. Other margin exchanges don't have this feature, they use the rest of your unused funds as a collateral so they expose all your funds and if you forgot to put a stop loss in a losing trade, you can say bye to all of them.
Also on BitMEX you can only open trades with BTC. That's extra good if BTC price is rising. Not only you can accumulate BTC with successful trades but a rising BTC value will increase your total holdings in dollar value.
Trade Forex Pairs, Stocks, Commodities with Crypto
The other margin exchange that I use is a new one called WhaleClub. What's different from BitMex is that you can trade not only with BTC but also with ETH, LTC or DASH.
Also you have the option to trade on currency pairs like Eur/Usd, Eur/Gbp and several others, Commodities like Gold, Silver, Oil or Indices and Stocks like NASDAQ, S&P500, Apple, Tesla, Amazon etc. I personally like having these options but beware, WhaleClub charges interest on your trade and it's pretty high for certain instruments like Gold or Nasdaq. I use it to trade currency pairs because their daily interest rate is 0.05%. You pay this as long as you are in the trade. Check the Fees section to make sure you don't get screwed by them. Whaleclub has demo function so you can test yourself without risking any money at first.
So as of writing this article Bitcoin is in consolidation phase. It tested the $5700 level 4 days ago and right now lingering around $6600. It looks like it's not going to shoot up over $10.000 in an instant but it will continue creating waves. This gives you a good opportunity to short when it hits important resistance levels.
Other trade opportunities in margin trading could be in Eur/Usd currency pair and more volatile pairs like Usd/Mex. Stocks like Amazon also looks promising if you want to use your crypto in a more established market like Nasdaq. I suggest you to use the demo trading function of Whaleclub to test yourself and get acquainted with certain markets before putting in your crypto.
Lastly if you want to do margin trading with any of these exchanges that I mentioned, you will have some advantages registering with my links.
In Whaleclub you'll get %30 Bonus for the funds that you transferred there.
whaleclub.co/join/tIuro
In BitMEX you will have reduced fees for each trade.
www.bitmex.com/register/OhougF
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