Margin trading cryptocurrencies, and any other asset, for that matter, comes with a huge potential upside for increased profits. However, it also has its dark side as the risk of losses is also substantially magnified. This cryptocurrency trader goes at large explaining how he lost all his funds after being under-prepared and taking upon margin trading without the necessary skills or knowledge.
I Lost Everything
A recent thread explains at large how a young student with great belief in cryptocurrencies has lost all of his funds after failing in margin trading.
The student claims that he had started accumulating cryptocurrencies, mainly Bitcoin (BTC) and Ethereum (ETH) during the prolonged bear market of 2018. He had been using the money he earned at his part-time jobs and a large portion of his student loans in order to buy crypto every single month. He says that the bear market didn’t discourage him, even though he had seen a serious part of his portfolio diminish in value.
It was then when he discovered margin trading options on popular bitcoin margin trading exchange BitMEX.
Failing to apply the appropriate margin trading strategies and with no prior experience in the ordeal, he quickly lost his initial deposits. As it oftentimes happens, though, he didn’t stop there and went on to deposit everything he had, only to lose it quickly after that.
Summing it up, the student lost all of his crypto funds, which was a total of one Bitcoin, in his own words described as “everything that I had.”
Surely, losing 1 BTC might not sound that much for some people, but it’s all relative and it highlights the fact that it’s critical to be very careful when using margin trading. The student itself said this:
“If there’s anything that anyone can take away from this, it’s to not mess around with margin trading and leverage unless you really know what you’re doing.”
What Can We Learn From This?
There are a few essential lessons that we can learn from this student’s misfortune. First and foremost, margin trading is considered to bring the highest risk. As such, you should never use your long-term cryptocurrency investments to margin trade.
Second, you should always be aware of your liquidation price. Especially when trading with cryptocurrencies, this liquidation price can come in an instant and force close your positions, leaving you out to dry.
Third, you should never trade under pressure. You should never try to “prove yourself.” If you experience a bad trade and lose money, go out, take a breath of fresh air and stop trading for a short while until your mind freshens up again. You can also take a look at some additional margin trading tips before you put your BTC into it.
The situation only highlights how important it is to base your trades solely on information and to leave emotions out of it. More importantly, it also shows the challenges of trading cryptocurrencies. Of course, there are plenty of success stories which show exactly how profitable margin trading can be when done right.
It’s also important to note that ‘regular’ crypto trading can also cause lots of losses. Just recently, Cryptopotato reported that a trader had lost almost 50 BTC by investing in 50 different altcoins back in mid/late 2017.
In other words, cryptocurrency trading, be it on margin or not, can both make you and lose you money. Be careful when you place your trades and, once again, make sure you have the right information to do so. This is especially true now that more exchanges, including Binance, are adding margin trading options to their platforms.
The post Margin Trading Risks: This Student Lost All His Bitcoins. What Can Be Learnt? appeared first on CryptoPotato.