How to protect yourself against excessive losses?

When trading with a lever, adverse exchange rate changes may cause losses exceeding the amount of capital invested. Therefore, it is worth using mechanisms that protect against excessive losses:

Stop Loss

Setting the Stop Loss for the item allows you to automatically close the position in case of an unfavourable change in the course. If the bitcoin price drops below the set value (at long position) or rises above the set value (at short position), the position will be automatically closed. This allows you to reduce losses in case of an undesired change in the rate, because if the rate starts to rise or fall quickly, the Stop Loss mechanism will close the position before the losses become too large.

It should be remembered that due to the limited depth of the market, the stock market system does not guarantee that the position will be closed exactly at the Stop Loss rate – it depends on the number and amount of buy and sell orders currently on the stock exchange.

Increasing the security deposit

Increasing the amount of the margin securing the positions allows you to use more funds to secure open positions. You can use this mechanism while waiting for the trend of the exchange rate to reverse. Then it will be possible to reduce the amount of the deposit again and release the funds that were used to secure it.

Podziel się wpisem

Leave a Reply

Your email address will not be published.