Misconceptions about the true purpose of futures and leverage trading often leads many novice traders to financial ruin. noshitcoins explains three key mistakes to avoid when trading in crypto futures markets.
Many traders frequently express some relatively large misconceptions about trading cryptocurrency futures, especially on derivatives exchanges outside the realm of traditional finance. The most common mistakes involve futures markets’ price decoupling, fees and the impact of liquidations on the derivatives instrument.
Most crypto trading services do not use U.S. dollars, even if they display USD quotes. This is a big untold secret and one of the pitfalls that derivatives traders face that causes additional risks and distortions when trading and analyzing futures markets. The futures contract price has decoupled from spot exchanges, so traders must adjust their targets and entry levels whenever using quarterly markets.The core benefit of futures contracts is leverage, or the ability to trade amounts that are larger than the initial deposit .
Even if traders understand the additional costs and benefits of using a futures instrument, an unknown element tends to present itself only in volatile market conditions. A decoupling between the derivatives contract and the regular spot exchanges is usually caused by liquidations.
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