Topic: Leverage investment strategy during bull market (Read 201 times)

Exchange hacks are very common in our modern era with crime and fraud increasing by the day. Alot of people have fall victims of this situation, but we are not to be blame, rather is the exchange that's support to be blame for having a weak security wall. Everyday hackers tries to penetrate and invade exchanges securities but with strong decode walls, many have not succeed on their mission. I'm safely using Binance and it's very important to trust the exchange security you're using.

Trading with leverage only makes sense in 2 cases:

1 - The amount of free equity to secure your position is enough to avoid liquidation even with extreme market dumps.
2- You are not dependent on the expected profit, that is, you have at least 1 other source of income. The Bitcoin market is cyclical and has always returned to the values ​​it previously traded at. The only question is how long is a trader willing to sit in a losing trade so as not to lose money and wait for the right price? But to speed up this expectation, we need averaging, and this already sends us to point 1.

Now almost any exchange can be hacked, but in this case it is very important how the exchange will react to such theft of coins and at whose expense this loss will be compensated. Two years ago, Binance returned the stolen funds after hacking at the expense of SAFU funds. The KuCoin exchange reacted in a similar way, which also compensated losses to its participants. That's why I chose these cryptocurrency exchanges for trading.

Using leverage during bull markets is way to risky for my own risk appetite. There are a few factors which make it a not a good idea in my opinion. First of all, markets are not rational during bull markets. You are right that you can maximise your profits using leverage, but it's much harder to predict market movements when investors are irrational. One bad news could send prices flying again. Another factor is that volatility is higher during bull markets, which means price jumps are larger and the chances to get wiped out and your positions being liquidated is also much higher.  The third factor which is against using leverage during bull markets, is that the borrowing cost are rising. At the moment we are seeing interest rates being hiked by central banks all around the world, that increases borrowing cost on loans. The last factor for me is that the opportunity cost have risen during bull markets. With higher interest rates on your bank account you need to make a higher profit in trading to compensate for that. In my opinion it’s better to limit your downside risk during bear markets, I would rather focus on preserving my portfolio than try to maximise profit. During bull markets it’s better to focus on maximising returns as they are more opportunities.

This is called averaging and is a good tactic, especially for those who don't like to use stop losses. But this risk management has one feature: averaging in order to bring the entry price closer to the current price will work positively for the trader if he started a deal with minimal risk, that is, 0.5-2% of the deposit. If he started the trade with a risk of 50%, then such averaging will only aggravate his situation. Trading that starts with 50% risk... it's not even trading, it's more like playing roulette.

We are only responsible for our own funds or whatever happens with it but a good exchange must also have a robust security so that it won't be penetrated by hackers easily. It's important if we will store our funds there for a long time but it wasn't really recommended though so it's better if we can just follow your idea.

One of the ways to protect our coin is by of course setting up a strong password and then setting up a 2fa. @Findingnemo I think it's okay to take a high risk as long as the return is also high. If you are still scared then it's okay to stay with your comfort zone. Leverage trading are only for those who are looking for an extreme way of making money.

I disagree if anyone recommends leverage investment. You can not use leverages and keep your positions too long. Pressure of loan repayment, forced liquidations will not allow you to actually invest.

Investment means using your own money to buy an asset and invest in it. The investment should be opened for a long time and without risk or pressure of using that money for other purposes like electricity, water bills, health care bills ...

Before you invest with your money, you should have another money resource for electricity, water bills and other regular bills as well as sudden expenses for health issues, accidents ...

Any leverage above x2 is the death of the deposit at a distance. I do not understand those gamblers who try to trade with leverage, for example x25, x50, x75. This is madness. Based on my own experience, I can say that margin trading has the right to exist if the trader always adheres to a few rules:

- The risk per trade is not more than 2% of the total deposit.
- Throughout trading, a trader should strive to LOWER risk (not vice versa)
- If you received a losing trade, do not try to increase the risk in order to return the deposit to the previous values ​​as soon as possible (this is a martin gale strategy, and it is unprofitable)
- Use the profit from successful trade not to increase the size of the position, but to increase the collateral of the open position.

Only by strictly following these rules, you can work with derivatives trading confidently and from a distance.

It is because they are newbies, or maybe some people just want to gamble. Any trader that wants high return of equity should be seen as a gambler. Even going 10x is higher.

I have naturally known this, I do not know it is called martin gale strategy until now. Just like trading could be a failure for new traders, also the strategy can be a failure for those that did not appropriately discipline themselves while using it. I can see this strategy useful in cases like having plan to trade with certain amount of money, but dividing it and using just lower amount to trade. Example is you having $1000 to trade, but you always trade with 0.5x of it which is $500, if the trade fail, you can then increase it to $1000 to bring the entry price closer whenever indicators told you to do so. But if done wrongly, it would result to maximum losses after also bringing the liquidation price closer.

If you trade on a centralized exchange, then you must approach the choice of an exchange for trading with full responsibility. But I think that the best solution in your case is to take a loan from a traditional bank, which in any case will be lower than you will have to pay on the stock exchange. In this case, you will not need to store your money on the exchange and you will be able to withdraw your coins to your personal wallet.

I am not really a kind of person who takes high risks because the returns can be higher than conventional, I just go with the spot trading cause even if I lose still its from my hand not the money of others that may help us to keep more calm even when the market is not doing really good still we can hold our nerve until the good days arrive.

This is a very good idea, I have also thought of it times without number. It may bring some inconvenience, but it is actually worth it. Even wouldn't be that inconvenience for leverage holders.

If I get you correctly, you meant instead of using derivative trading, to open a margin trading position using the bitcoin spot price is better? Any detailed explanation about margin trading over derivative trading in a position opened over long time period?

This is about opening a position for a long time using the perpetual trading pairs, it has nothing to do with weekly or monthly pairs.

It depends on if the position open before it closes favour you or not. Also know that this is about holding position for a long time using perpetual trading pair which makes your post like off topic to what we are discussing.

I don’t understand the post of this.

You opened a 100x leverage position on perp futures and got liquidated. So you are saying you won’t get liquidated with the monthly future expires?

If you use 100x on the future monthly or quarterly contracts you will still get liquidated. Only difference with those and perps is that the futures contracts have no funding rate while perps do.

If you are just planning to have a long position with leverage and you plan to hold or not close the trade for a long time, better to do it on spot trading. But if you are catching the bottom with leverage, then it's good for you. Wicks during the bull market or bear market are insane, lot of traders are being stop-loss hunted.

That was so much exposure there. Even at 50x, it's still considered to be high risk let alone the 125x you increased it to. Once it comes to trading, you've to remember that nothing is certain. Even when you know price is going to get to a certain level and you're very sure of it, it's still not advisable to take unmitigated risk. With 50x price wouldn't have liquidated you at the level it did with 125x. Perhaps, you still would've been safe (and saved) and in profit on that trade.

No serious minded trader will agree to that and say they won't keep their money on exchanges. Whenever I read about those advising against keeping money on exchanges, I know who truly doesn't trade for a living or who doesn't even trade at all or that often.

I just came into this leverage trading in cryptos newly and I haven't done much trading with it. For the few I've done I leveraged on 5x or 10x and that's with short time trades. I haven't held a future trade for more than 36hrs. If I'm to hold a trade on leveraging, it certainly won't be more than those parameters I've been using.

Well, when you know what the risks are then of course you will be very careful before making a decision. Not only can you expect profit where the potential loss is so real by adopting this trading strategy, so if it's known properly then I don't think you need to put a lot of money on something high risk like this.

I tend to recommend you to invest without a very high leverage strategy, it clearly proves to be risky. So you just need to consider investing normally without expecting multiple multiplier for big profits even though the risk will be worth the payoff.

I use to recommend never go with the future trade even if you are 100% sure about Market still try to avoid it as its toxic for the your funds. My point of view is play it safe why playing the Wide Ball to be Caught Out haha and its the case in the future trade. Your Points are valid. New dears be careful dont get trap in the greed.

My experience and issue with trading on exhcnsges for holding positions is that the fees are normally too high if you're doing something like that.

I opened at 20x long around the $20k region on the way up and held it for a few months, I sold at $63k for about 150% of the value (in bitcoin) I put in (the fees ate up the rest). It did perform better than the spot market but based off the risk and how bored I was checking the position I don't think I'll be trying it again.

The problem on any trading that involves leverage even low multiplier was the sudden strong wick that usually occur wild during a certain trend. Sometimes this wick grow to insane amount that typically liquidate all the existing open position even though you have a very far liquidation price. I didn't preferred long term investment for this reason because it can wipe out all your savings with just 1 wild wick coming frommwhales or exchange.

Spot is still the best or do future trading bots that only trade on price range that you set to avoid this wicks.

I think 'storing' in this case refers to how your fund is locked since you're opening a position. I don't think that's unavoidable unless you use a dex, but the volume would then be an issue. IMO just keep this in mind and avoid opening a very long time-locked position if you can.