[Leverage With Derivatives Trading Using 5 Min Chart ]-Steemit Crypto Academy | S6W1 | Homework Post for @reddileep
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What is Leverage trading
Most people say Leverage Trading is very risky and indeed it is risky but if you want to gain more profit within a short period, you have been advised to that the risk at your own pace.
Leveraged trading in a layman’s language is a type of trading strategy that helps traders to amplify their profit within a shorter time. Let's say if you have an amount of $100 times 5 leverage, then you will be having an amount of $500
For example, if you have an amount of $1000 and you decide to go into leverage trading with the $1000 Then It means that the trader can trade more than 1000 times of his amount with the help of leverage.
A trader gains huge profit with leverage when the market is in either an uptrend or downtrend.
In the same way, the same trader can get a huge loss in the market.
Benefits of leverage trading
Unlike Spot Trading where trader only goes in to buy an Asset when it's in a downtrend and sells when it starts to rise to an uptrend, Leverage trading gives traders some special treatment where:
With the help of low capital, traders in leverage trading can borrow crypto of their desire at a very low interest and can pay it back when the asset invested in starts to yield profit.
With the help of leverage trading, traders get to make huge profits with either an uptrend or a downtrend. This is in a way that traders worry less when the crypto market is in a downtrend or an uptrend
In leverage trading, traders can exit the market without stopping the entire order that has been initiated.
Freedom of choice: Leverage traders have a significant number of options than someone who doesn’t have access to capital…. Let’s say a crypto trader can leverage say an amount of $50 into 4 different Assets that give the trader a cash roll on each asset than taking that same amount of money and buying just one asset. The trader with the help of the 4 assets can put a down payment of 25% than the trader with one asset
With the help of leverage trading, crypto traders can accelerate most of their financial objectives. Because with the help of leverage, traders have access to extremely different types of powerful capital accounts which helps the traders to be able to complete their financial objectives.
Disadvantages of leverage trading
Risky: The level of risk in leverage trading is high and may sometimes lead a trader to lose all his assets if much care isn’t taken when entering the market.
High fee rate: Due to the high fee rate of leverage trading, most traders prefer the use of spot trading which charges fewer fees. Let’s say if you buy an asset using the spot trading and you were charged $1, when it comes to leverage trading you might be charged up to an amount of $5 especially when your trade is held overnight.
Liquidation:In Leverage Trading, Liquidation is real. Traders can lose all of their capital in this type of trading especially when the crypto market is read incorrectly by the trader. Which is why most investors tend to use more than one indicator though it might not be 100% accurate but it gives them a clear view of what’s going to happen within the next few hours
Basic Indicators used in Leverage Trading?
Indicators help traders to predict the next trend to be formed in the crypto market. It may be an uptrend where traders have to buy assets or it may be a downtrend that gives them the upper hand to sell their assets before they run at a loss. It is advisable by the professional traders that when entering into the Leverage Trading, the trader or investor with the help of these indicators should be able to tell the trend in which the market is moving before their run at a loose…
In this topic, we are going to talk about some indicators used by leverage traders.
- Parabolic SAR: With the help of the parabolic indicator, traders in the crypto market can predict whether the market is in an uptrend or a downtrend.
In the chart below, the parabolic indicator is mostly represented with doted points on the cryptograph whenever you use the indicator.
With the help of the parabolic, the traders have a high chance of spotting a trend reversal.
Screenshot taken from Tradingview
- Relative Strength Index: In using the RSI indicator, traders can see the overbought and oversold of a specific asset. In the RSI indicator, we have the 70 thresholds and the 30 thresholds. The 70 threshold shows the overbought of a specific asset in the market and whenever this occurs, there is a high chance of trend reversal which means trends start to move from bullish to bearish within the next few weeks.
We also have the 30 threshold which shows the oversold of an asset. Whenever an asset hits this region on the RSI indicator, it is predicted that there will be a reversal in trend from bearish to bullish within the next few weeks.
screenshot taken from Tradingview
Special Trading Strategy for leverage trading
Screenshot taken from tradingview
In the 30-min TRXUSDT chart above, I have added the Parabolic SAR with the RSI indicator and identified a bearish trendline. As soon as the RSI showed overbought, this suggested that there is about to be a bullish reversal. The parabolic SAR confirms this reversal when it moves below the price. To top it all off, we see the break of the bearish Trendline suggesting that the bearish run is coming to an end.
The screenshot above shows how I placed my buy order. I entered with a market order with stop loss at $0.06248 just below the longest wick of the developing support around the region, and take profit at 0.06822 to be in a 1:2 R: R.
Below is proof of my trade.
Screenshot taken from binance
Screenshot taken from binance
Screenshot taken from Tradingview
In the 30-min TRXUSDT chart above, we can see the parabolic SAR showing a reversal signal when the dots appear above the candlestick chart. This reversal signal is confirmed by the break of an important support level. I then proceeded to close my ealier long position after the appearance of the reversal signal. Below is proof of closure of my position.
Screenshot taken from binance
Conclusion
Leverage Trading is a risky investment and if you want to make a huge sum of money in the market, then I advice you to practice leverage trading but make sure you trade responsibly because you also loose a huge asset in leverage trading.
I stop here by saying a big Thank You to professor @reddileep for giving us search an exclusive and educative lecture on Leverage trading