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[vc_row][vc_column][vc_column_text]There are more ways to trade cryptocurrencies beyond simply buying or selling an asset in exchange for another at a spot cryptocurrency trading platform.
Although many types of derivatives and other types of contract-based trading instruments exist outside of the world of cryptocurrencies, these powerful yet risky tools often require certain levels of income, net worth, and more. This is because a complete loss of funds is possible with such tactics.
These other types of contracts amplify the effects of the already volatile asset class considerably. For example, margin trading platforms that offer contract-based derivatives can sometimes provide as high as 100x leverage on cryptocurrency trading.
Leverage utilizes an account with capital, called margin, and applies a portion of it as collateral to greatly multiply the value of the position. This allows more experienced traders to risk less, yet earn more. But for those that aren’t careful, 100x leverage can lead to a loss that is dramatically amplified by one hundred times.
Utilizing risk management strategies and protections like stop loss orders are necessary to manage this type of trading instrument and isn’t recommended for beginner traders.
Still, this type of trading instrument is the dominant choice in the high stakes and unregulated cryptocurrency market.
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