🚨 Although contract trading has attractive returns, the risks are also really high! If you are not careful, you will fall into the trap and lose all your money! 😱 Today I will give you an inventory of the common risks and traps in contract trading, as well as super practical avoidance techniques!
⚠Common Risks & Pitfalls of Contract Trading
1️⃣High leverage risk
The higher the leverage, the greater the return, but also the greater the risk! Many people use 20x or 50x leverage right from the start, but as a result, their positions are liquidated at the slightest market fluctuation, leaving them with no chance to recover!
2️⃣Slippage risk
When the market fluctuates violently, the order execution price may be very different from the expected price, especially for low-liquidity currencies. Slippage can cause you to suffer heavy losses!
3️⃣Forced liquidation risk
When the margin is insufficient, the system will force liquidation. Especially when the market fluctuates violently, your position may be liquidated before you have time to replenish it, which can ruin your mentality!
4️⃣ Emotional Trading
Many people rush to add positions to spread the cost when they see losses, or are greedy and don't stop profiting when they are profitable. As a result, they lose more and more, and earn less and less, and in the end, everything is gone!
5️⃣Platform Risk
Some small platforms may engage in such outrageous operations as plugging in pins, unplugging network cables, and running away, and the safety of funds cannot be guaranteed at all!
🛡Tips & methods to avoid risks
1️⃣Control leverage and operate steadily
It is recommended for beginners to start with low leverage (less than 5 times) and gradually increase it after getting familiar with the market. Don't be greedy, survival is the most important thing!
2️⃣Set take profit and stop loss
Be sure to set the stop-profit and stop-loss points in advance to avoid emotional operations. When you make a profit, you should take the money in time and when you lose money, you should cut your losses decisively. It is most important to keep the principal!
3️⃣Choose a highly liquid currency
Try to trade mainstream currencies (such as BTC, ETH) and avoid small currencies to reduce slippage and liquidity risks.
4️⃣ Diversify your investments to reduce risk
Don’t invest all your funds in contract trading, and don’t go all in on one currency. Diversifying your investments can effectively reduce risks and avoid losing all your money at once!
5️⃣ Choose a reliable platform
Be sure to choose a large platform with a good reputation and high security to avoid the black box operations of small platforms.
6️⃣ Keep learning and stay calm
Contract trading requires continuous learning and summarizing experience, keeping a calm mind, and not being swayed by market sentiment.
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