I’ve always had a risk appetite, and my tendency to disregard others’ advice led me on a path of discovery — some might call it a hard lesson — about the true nature of leverage trading.Today, I share my story not as a cautionary tale but as an educational journey through the highs and lows of leveraging in the crypto market.To give you some context: During the last bull run, I lost almost $150,000 (here’s the complete story). Although many factors led to these devastating results, leverage was like the afterburner.So let’s have a detailed look at this high-risk crypto trading approach, what went wrong in my case, and how you can avoid this.
The Allure of Leverage
Here’s some theoretical background in case you are not familiar with leverage trading: Leverage trading, in essence, allows you to borrow funds to increase your trading position beyond what would be available from your cash balance alone.
The potential to skyrocket profits through this method is undeniable. Who wouldn’t want to amplify their gains, especially during a bull run?But here’s the catch: with great power comes great responsibility — and, in this case, an immense pressure level.
The Pressure Cooker
As long as the market was in my favor, everything seemed fine. The problems began when the inevitable downturn occurred.Suddenly, I found myself glued to my screen, caught in an endless loop of anxiety and speculation.Questions like “Do I have enough margin?” “Should I add more?” and “What’s my liquidation level?” became my constant companions.
And constant means constant: 24/7. When I woke up in the night, I checked my margin. I even set an alarm every 3 hours during the night to check my margin.The stress of potentially losing not just my positions but my entire investment was overwhelming.
I felt a pressure I’d never experienced before. And it began to take over my entire private life. I didn’t have time to focus on the family, I wasn’t in a good mood, and on and on.
The Harsh Reality
Frankly, throughout my journey, I’ve met only a handful of traders who’ve managed to turn a consistent profit with high leverage.The vast majority, including myself, have suffered losses.But it’s not just about the financial toll; the emotional and psychological strain can be just as debilitating.The pressure of leverage trading doesn’t just stay in your trading room — it seeps into every aspect of your life, affecting your emotions, relationships, and even your health.
A Path Forward: Using Leverage Wisely
So, how does one navigate the treacherous waters of leverage trading? Here are a few pieces of advice for those considering or currently using leverage:
1.Opt for Low Leverage: High leverage can lead to high rewards, but the risks are equally significant. Start with low leverage to keep potential losses within manageable limits.
2.Use Stop Loss Orders: Always protect your trades with stop loss orders. This ensures that your losses are cut before they become too substantial.
3.Trade Only in Trending Markets: Leverage can work well in markets with a clear trend. In volatile or sideways markets, the risks are magnified.
4.Allocate a Small Portion of Your Portfolio: Never put all your eggs in one basket, especially when using leverage. Keep it to a small portion of your total investment.
5 .Monitor Your Trades Closely: Leverage requires your constant attention. Ensure you have the time and mental bandwidth to manage these trades effectively.
Leverage is a powerful tool in the hands of a crypto trader, but it’s not one to be wielded lightly.My experience during the last bull run taught me the importance of respect for the market and the tools at our disposal.I hope to enlighten others on the path to more sustainable and less stressful trading practices by sharing my story.Remember, in the volatile world of crypto, the best weapon is knowledge and a well-thought-out strategy.
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