Please Note That This Article Is Not For Beginners
On the 2nd of October 2021, a major News Headline was the death of a 23 year old Computer Science student of the University Of Akure, who was found hung to death by suicide in his lavishly furnished two bedroom flat in the University’s off campus. Tobe, as he was called had earlier posted a cryptic Whatsapp status, but before his friends could get to him, he was already dead. The trigger to his suicide? Futures Trading! Tobe held over 23,000 Dollars in his Binance Portfolio some minutes before his death, and he lost it all within the few minutes he had left on Earth.
This is the story of a lot of newbie Derivatives Traders in the Crypto Space, who get lost in the greed that comes with Futures Trading. These sets of people make two common mistakes:
Greed:
It is greedy to go all in on all your Holdings. If you must Short Trade, do so with a certain percentage of your total holdings. If you think staking with a percentage of your holdings will not bring in much profit, then don’t trade at all. Put your holdings on a long Trade and wait for it to grow. Patience is the most important virtue in both long and short Investment.
Underestimation Of Crypto’s High Volatility
A second common mistake of newbie traders is their underestimation of the high flexibility of Cryptocurrencies. Cryptocurrencies are highly volatile, this is the bases of Futures Trading. Before you short, ensure the Market is in it’s most stable chart. Shorting on a Bull Rally is highly Risky and only works for Big Digits Holders that can manipulate the Market’s Volatility with their movements. Always bear in mind that Values can go lower no matter how low they may seem at the moment, as much as they can go higher no matter how high they might be at the moment.
HOW YOU CAN TRADE SAFELY IN FUTURES TO AVOID ACCUMULATING EXCESSIVE LOSS
Futures makes Millionaires, just as much as it breaks them. If you have read to this point, then you are probably an expert trader who understands Futures Trading. While this article is based solely on Cryptocurrency Futures Trading, Futures Contract can be carried out on a variety of assets, including oil, soybeans, stocks, coffee and a host of other values. Futures gives trade parties (Buyer and seller), the opportunity to trade an asset on a future date at a contracted price. While it sounds easy, you could either go long in anticipation of a price growth, or go short in anticipation of a price drop. This gives traders the opportunity to utilize their market observatory experience to double or triple their portfolio over a future time, by predicting growth or drop in price. The risk is high, so it is highly advicable that you apply all the necessary precautions when trading Futures Contract.
Apart from avoiding the two common mistakes listed above, Exchanges also offer Traders the opportunity to Manage their Open Orders Using Trading Limits. These Trade Limit Managers are called Stop Loss and Stop Profit. Most traders ignore this, even though it is a very safe means of lowering your potential loss and greed. Using these orders means you are trader with a goal and a budget.
STOP LOSS
Stop loss (SL) is a price range set by a trader mandating the automatic stoppage and closure of his trade to avoid further loss when market trends towards the mandated price. When a trader sets a Stop Loss on a trade, and the price of the asset reaches to the set limit, the open trade will close, saving the trader from further loss. This is a great utility for traders as you can always wait for volatility to stabilize before opening another position.
STOP PROFIT
Just like Stop Loss, Stop Profit closes the open order when the price of the commodity trends to the mandated price of the Stop Profit. Using this Trade management utility helps to manage the risk and breeds the virtue of contentedness, because market will surely re trend downwards to cause even greater loss. Using the Take Profit utility shows the trader is not in to flow with the wind but rather has a target and a trading plan.
STOP TRADING IN EVENT OF MASSIVE LOSS
When you experience a massive loss, it is advisable to quit trading at that particular time and go for a walk to refresh your nerves. Continuing trading means you are hooked on revenge and had let your emotions to get the best of you. Never trade with your emotions and make sure you have a trading plan.
Following these guides will help prevent accumulating massive loss when you are Trading Futures.
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