Evaluating The Risks Of Leverage Trading In Perpetual Futures

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Risk assessment of lever trading in eternal future: A warning

The world of cryptocurrencies has recorded a significant number of popularity in recent years, with many investors gathering in digital currencies such as Bitcoin and Ethereum. One of the ways of participating in these markets is continuous Futures trade, which allows traders to buy or sell contracts on the day of validity at any price that was selected. However, there is a great risk with great power, especially when it comes to leverage trade. In this article, we will assess the risk of lever trading in constant timely contracts and provide investors with tips who want to participate in these markets.

** What is trade in a leverage in a perspective perspective?

The Futures perpetual usufruct lever includes the purchase or sale of margin contracts that allows traders to control more financial units than actually. This means that if the price of the basic asset is moving against traders, they may lose a significant part of their initial investments. In the case of eternal timely contracts, the lever is usually 5: 1, which means that for each trade in the amount of $ 100, the size of the trader’s position would be equivalent to USD 500.

Risk of lever trading in constant timely contracts

Although the lever trade can provide high returns, it also has significant risk. Here are some key threats to consider:

• Risk of liquidity : During perpetual trade, Futures liquidity is often limited due to the low level of transaction and the lack of market manufacturers. This means that traders can fight for quick sale of their positions or at a positive price.

• Risk of volatility : Eternal Futures are intended for high frequency trade and are usually traded on the end -up markets. However, this also means that prices can move quickly, and traders must be prepared for unexpected price fluctuations.

• If these market creators are not able to provide sufficient liquidity, prices may become unstable, and traders may lose control of their positions.

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• Risk of a contractor : During perpetual trade of Futures, there is always a risk that one or both sides in the transaction may deal with their duties.

Real examples of leverage trade risk

A few examples illustrate the risk of leverage trade in eternal future:

• Bitcoin Futures:

In 2018, Futures Bitcoin was released by Chicago Mercantile Exchange (CME) and Intercontinental Exchange (ICE). However, there was a significant incident in which the trader was unable to sell his position quickly enough, which caused significant losses.

• Ethereum Futures:

  

In December 2020, CME launched Ethereum Futures. The platform had liquidity problems, which leads to trade detention and significant losses for traders.

Risk reduction with appropriate trade strategies

To minimize the risk of trade in the eternal Futures lever, it is necessary to employ the right commercial strategies. Here are some key tips:

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• Use the position size : Using the position size techniques can help control exposure and reduce risk.

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• Monitor market conditions : Continuous monitoring of market conditions and adapting trade strategies if necessary can help minimize risk.