Picking a digital asset for trading, you should pay attention to its capitalisation and learn its price chart. Large-cap coins such as BTC are less sensitive to market trends and changes, which means if investors start to sell Bitcoin, its price will not drop immediately. Low and small-cap assets (such as NEO) react to every market’s fluctuation and are more likely to skyrocket when the market goes up and collapse if the market drops. So if BTC is a good asset for long-term investments, coins such as NEO are good for daily trading. Of course, provided that a trader knows where the market will move next and can read price charts and predict the next drop or rise. Knowing the peculiarities of the NEO crypto price, it is possible to generate income using the margin trading tool. Let’s talk about it.
What is Leverage Trading Crypto?
You may use leverage when you don’t have the needed sum to enter the market at the most profitable position. This tool is offered by large crypto trading platforms such as WhiteBIT and Binance. Each of them provides a different possible leverage ratio; for example, on WhiteBIT, you may use a maximum of 1:20 leverage. It means the number of times you multiply your initial amount. For example, you have $1000 but are willing to buy crypto for $10 000; for that purpose, you need the leverage of X10. If the market moves as you plan, you will gain income as if you really invested $10 000.
Leverage is borrowed funds. It allows the opening of much more profitable positions in the market and, thus, generates much bigger profits. With borrowed capital, you can buy much more coins than you could buy, having your initial sum. On the other hand, where there is huge profit potential, there are huge risks. Now we come to the disadvantages of using leverage:
- Bigger losses. If the market does not move where you suppose it to move, you will have to add funds to support your collateral; otherwise, your position will be liquidated, and you will lose all funds.
- Leverage is not a tool for novice traders.
- In trying to recover losses, traders often do everything to raise their losing position, which leads to more losses. That is a widespread trap.
Among cryptocurrency leverage trading advantages, we would like to highlight the possibility of going long and short. That is, to make money on the growing and dropping market. Read more about leveraged trading on the WhiteBIT blog.