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Have you ever found yourself feeling scared after placing a trade? If so, you are most likely putting too much capital into the trade for the amount of confidence that you have in yourself as an investor. Confidence is key and too many traders lack it. One of the best strategies to help build confidence and limit emotions is "dollar cost averaging". It is a simple concept that consists of splitting up your capital investment and buying at different pricing levels.
Dollar cost averaging is effective because it decreases the break-even point of a trade. In the video above, I was able to decrease the break-even point of a BTC trade by nearly $2000. While doing this, I am also significantly decreasing my risk.
The best way to set-up a dollar cost averaging strategy is when a coin is starting a possible bearish trend. In this situation, it is difficult to see how low the coin is going to go. I suggest splitting up the planned investment into 5 different parts and placing limit buy orders at the previous support levels of the coin. Why choose support levels? If the coin bounces off the support and ends up in a bullish trend, you bought the bottom. If the coin breaks the support and falls, you have another buy order set up at the next support to help protect yourself.
Trading without emotion is more important than anything else. 90% of the mistakes that traders make are due to their emotions. Using dollar cost averaging is going to help limit emotions and give you a greater potential upside than a "lump sum" investment.
Magnr is a handy cross-platform trading site connected to a few big Bitcoin exchanges. Accounts never require any personal data or identitiy proof. So signup is quick and possible with anonymous data.
Leverage is available at Kraken up to 5x for several cryptocurrency pairs, including bitcoin. The fees are depending on the volume of the margin account.
Bitcoin can be traded on GDAX up to 5x leverage. The margin trading option must be manually turned on the account in order to make sure the users understands and reads the associated risks.
Margin trading is basically borrowing funds to purchase an asset, this allows you to buy more bitcoins that you would normally be able to do normally in the hope of making bigger profits on the price movements.
Advantages of Margin Trading.
The biggest benefit of margin trading is that you can take advantage of the additional funds when the market moves in the direction you expected. The overall profit of the positions once the bitcoins are soled and the loan is repaid is significantly higher compared to an ordinary trade execution.
Disadvantages of Margin Trading.
The disadvantage of margin trading is by nature the amount of risk a margin account can hold. The higher amount of leverage you take the bigger amount of money you can loose in case the market moves in an unfavorable way. Due to the margin call, the margin account must be funded countinuesly that involves significant amount of liquidity. It is only advisable to trade on marking if you have enough experience already on the market. To mitigate the associated risk, many trading platforms only offers limited amount of leverage trading opportunites.