Be careful with margin trading. (story)

[TrevorS]

I guess I’ll say a few commonplace things, but I can’t be silent.

My friend lost a lot of money in the last bitcoin move. The story is that he traded on signals.
Having a deposit of several thousand dollars, he received a signal (these were signal from one very famous trader, he trains him) to open a short position with a leverage of 2.5x at the level of approximately $ 8000 (I may be slightly mistaken).
As you know everyone was waiting for the fall of Bitcoin. My friend shared information with me, but I decided that I would spend this weekend without trading.

In general, before going to bed, my friend decided to check the market, and was delayed for 5 minutes. These 5 minutes decided everything.
He saw how the price of bitcoin began to grow at a frantic pace. He was shocked. At first he wanted to give the debt back to the exchange,
but it didn’t work out because he was sitting on the phone, and in the application from the Huobi exchange there was simply a disgusting procedure for returning the debt, absolutely not intuitive.

In general, when the price reached $ 10,000, he was already in a panic, did not know what to do, because the liquidation price was displayed as $ 10,200.
He frantically begins to buy Bitcoin for the remaining USDT, thereby increasing the liquidation limit, but he did not have time, and his position was liquidated.
He lost a significant amount, and fell into a rather severe upset.

Personally, I believe that all this could be avoided if:
1. Do not trade on signals
2. It doesn’t matter if you trade in signals or always set your own stop loss, even in the most obvious situations when it seems that there can be no other way.
3. Remember that margin trading can deprive you of your pants at any time. These are extremely high risks.
4. Be prepared for losses. If you take a risk, then accept responsibility for this risk at the time of opening a position, and not after its closure.


Be smart and take care of yourself guys.

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[dark08]

Dont trust any signal group its better to built your own strategy on trading in that case you will not blame people if you lose on your trade, sorry to hear that your friend lose a lot of money atleast your friend learn from mistake now if their comeback on trading its better to plan there trade.

[Pearls Before Swine]

Dont trust any signal group

That's good advice, because the more traders trading on any given 'signal' the less effective the strategy is going to be, not that I think any of those things work in the first place.

Op, a short position combined with leverage is like quadruple the risk, a huge loss just waiting to happen as your friend found out.  Short selling is nerve wracking enough on its own, as the potential losses can be unlimited.  I cannot imagine borrowing money to finance that kind of trade.  I know its done in the stock market all the time, but in crypto?  That's insane.

Remember that margin trading can deprive you of your pants at any time.

That's an interesting way of putting it.  Short selling is even worse.  Margin trading in general is *relatively* safer, though still extremely risky.  Hopefully your friend learned a lesson from this disaster.

[TrevorS]

Dont trust any signal group its better to built your own strategy on trading in that case you will not blame people if you lose on your trade, sorry to hear that your friend lose a lot of money atleast your friend learn from mistake now if their comeback on trading its better to plan there trade.

I did not say that it was a signal from a group specializing in signals. It was a signal from his teacher who is a serious trader.

[exstasie]

My friend lost a lot of money in the last bitcoin move. The story is that he traded on signals.
Having a deposit of several thousand dollars, he received a signal (these were signal from one very famous trader, he trains him) to open a short position with a leverage of 2.5x at the level of approximately $ 8000 (I may be slightly mistaken).
As you know everyone was waiting for the fall of Bitcoin. My friend shared information with me, but I decided that I would spend this weekend without trading.

In general, before going to bed, my friend decided to check the market, and was delayed for 5 minutes. These 5 minutes decided everything.
He saw how the price of bitcoin began to grow at a frantic pace. He was shocked. At first he wanted to give the debt back to the exchange,
but it didn’t work out because he was sitting on the phone, and in the application from the Huobi exchange there was simply a disgusting procedure for returning the debt, absolutely not intuitive.

In general, when the price reached $ 10,000, he was already in a panic, did not know what to do, because the liquidation price was displayed as $ 10,200.
He frantically begins to buy Bitcoin for the remaining USDT, thereby increasing the liquidation limit, but he did not have time, and his position was liquidated.
He lost a significant amount, and fell into a rather severe upset.

Tough break. I made some mistakes like this in my younger days. This is why you always need an active stop loss order. No "mental stop losses" or any such nonsense like that. If it's not on the order book, it's not a stop loss.

It sounds like your friend didn't enter the trade with a plan. This is the biggest danger of following other peoples' trades. Before entering a trade, you should always have three things set in stone: entry, target, stop loss.

$8K was quite early to enter a short but I understand the idea: short the bounce in a downtrend. That's reasonable enough. The key is to take small losses on failed shorts like this, not risk your whole account.

[Wexnident]

Isn't a teacher supposed to let his student go and do what he decides upon after teaching him everything? Well, thats what I would do anyway. A real pity though. The rise was too fast last time so I don't blame him for not being able to make it. Although i do blame him for trusting signals not made by him.
Plus, the fact that he actually made a debt is kinda weird? I'd advise to my students (if i ever had one) that only trade what you can afford to lose. It's kinda defeats the purpose if you go all in and lose everything because of that.
Well, only thing you can say to your friend at this point is, pretty much just try again next time.

[MI6]

Margin trading is really hard, even for expert usually they are on wrong step and then lose too much in margin trading. Maybe your friend need to take a rest first, trading in margin is have bigger risk because it is not like trading as usual when we can hold as long as we want.

[Suslived]

So sorry to hear about your friend. I hope he/she was not actually you. It's common to hear horror stories like this with margin trading so it's crucially important that one makes sure he knows what he is getting into and knows when, if not at least HOW, to get out.

Also, signal trades are complete witchcraft. Unless someone provides solid technical analysis you shouldn't really listen to a signal trade just because the person who said it is "famous."

[maxreish]

Here's what I mostly noticed in margin trading.

• Never trust paid signals, it doesn't guarantuee that it may really happen.
• Rely to your own TA (Technical analysis), since your friend has a knowledge reading indicators, chart, volumes (well, I guess so) then he/she knows the right time to enter and exit the trades.
• There are unexpected sideways.
• Liquidity is easily achieved when sudden huge pump/dump happens and that is why setting stop loss is very important in margin trading. Does his mentor not mention or teach about it?

Hope, this serves as a lesson to your friend. That's how margin trading goes. We can lesser our huge loss by setting up lower leverage and stop loss.

[Strongkored]

From the OP story and also some replies in this thread, teach many things:
1. Don't fully believe with other people's analysis even they are an expert.
2. Always calculate amount we can afford to lose.
3. Maximize all the features on the exchange to minimize the bad possibilities that occur when trading.
4. Don't spend more money just for a signal, better to spend money for course to learn about TA and anything else about trading, than pay for a signal's analysis.
5. Don't do something that don't know how exactly it work, like margin trading is.

[zeze18]

I guess I’ll say a few commonplace things, but I can’t be silent.

My friend lost a lot of money in the last bitcoin move. The story is that he traded on signals.
Having a deposit of several thousand dollars, he received a signal (these were signal from one very famous trader, he trains him) to open a short position with a leverage of 2.5x at the level of approximately $ 8000 (I may be slightly mistaken).
As you know everyone was waiting for the fall of Bitcoin. My friend shared information with me, but I decided that I would spend this weekend without trading.

In general, before going to bed, my friend decided to check the market, and was delayed for 5 minutes. These 5 minutes decided everything.
He saw how the price of bitcoin began to grow at a frantic pace. He was shocked. At first he wanted to give the debt back to the exchange,
but it didn’t work out because he was sitting on the phone, and in the application from the Huobi exchange there was simply a disgusting procedure for returning the debt, absolutely not intuitive.

In general, when the price reached $ 10,000, he was already in a panic, did not know what to do, because the liquidation price was displayed as $ 10,200.
He frantically begins to buy Bitcoin for the remaining USDT, thereby increasing the liquidation limit, but he did not have time, and his position was liquidated.
He lost a significant amount, and fell into a rather severe upset.

Personally, I believe that all this could be avoided if:
1. Do not trade on signals
2. It doesn’t matter if you trade in signals or always set your own stop loss, even in the most obvious situations when it seems that there can be no other way.
3. Remember that margin trading can deprive you of your pants at any time. These are extremely high risks.
4. Be prepared for losses. If you take a risk, then accept responsibility for this risk at the time of opening a position, and not after its closure.


Be smart and take care of yourself guys.

Margin trading is just a gamble our luck if we don't know anything about technical analysis.
The reward is high when we win, but we can almost lost all of our assets if we lost, so for anyone who will start doing margin trade, i suggest is just use your free money, money that you can afford to lose and money that you won't need in near future

[leea-1334]

Do not trade. That is the lesson!

Not just on margin, but on trading. The statistics show a huge majority of traders make losses. You only give money to the exchange.

Get a real job, maybe invest in diverse portfolio and keep holding BTC. BTC if you bought in March is now up 200%. Who can make that money trading consistently?

Be smart and do a real job that gives you value.

[ableh]

From the OP story and also some replies in this thread, teach many things:
1. Don't fully believe with other people's analysis even they are an expert.
2. Always calculate amount we can afford to lose.
3. Maximize all the features on the exchange to minimize the bad possibilities that occur when trading.
4. Don't spend more money just for a signal, better to spend money for course to learn about TA and anything else about trading, than pay for a signal's analysis.
5. Don't do something that don't know how exactly it work, like margin trading is.

In addition, besides having to pay attention to a few points above, the most important thing is "don't be greedy in taking profits". My story: the first time i used margin trading at Poloniex with an initial capital of 0.01 BTC, at that time it was get profit already around 0.003 BTC, but because didn't close it finally i got Margin Call (MC) 

[carlfebz2]

Dont trust any signal group its better to built your own strategy on trading in that case you will not blame people if you lose on your trade, sorry to hear that your friend lose a lot of money atleast your friend learn from mistake now if their comeback on trading its better to plan there trade.

I did not say that it was a signal from a group specializing in signals. It was a signal from his teacher who is a serious trader.

He just basically wasting up some fees for that teacher to teach him up.If that teacher is already profitable in trades then he wont tend to find some student to teach on
but rather would trade on his own without any distractions on any other matter plus he lost up money because he trust up too much on whats being told.
Its been said for how many times that never ever trust a signal from anyone.You can eventually look on it but dont fully rely, always rely with your own analysis.
Set always some SL yet margin trading is way more riskier.

[adroitful_one]

First of all, if he's paying money to this guy to "teach" him and give him signals, he needs to try to get his money back. Don't believe anyone that tells you they have a signal that you should get in on unless their name is Warren Buffett. Even then, ask for government issued ID beforehand. If your friend had taken even 10 minutes to learn anything about reading market history and technical analysis on his own before he started paying this guy, he would have known that we were pretty close to the bottom for a little while.

[rijaljun]

We must aware of the risk. Stock trading is risky and crypto trading has higher risk becuse of the volatility. People make mistake everyday and that's why signals are not things to have 100% of our trust. I do believe margin trading is more complicated and has higher risk than spot trading, but it's always possible for us to learn and earn much profit one day.

Do not trade. That is the lesson!

Not just on margin, but on trading. The statistics show a huge majority of traders make losses. You only give money to the exchange.

Get a real job, maybe invest in diverse portfolio and keep holding BTC. BTC if you bought in March is now up 200%. Who can make that money trading consistently?

Be smart and do a real job that gives you value.

Where can I see the statistic?

Also, holding always has different perspectives, like the holding result you mentioned will be different with those who bought at early 2018. It's a subjective thing.

[Ryker1]

Well, there is no accurate result if you are relying upon your teacher that giving a signal. Do you think if they had a good result in trading they are wasting their time teaching others? Instead, they will do for their own good just to have a better profit than teaching others. As a trader, it is not an easy job for us because it needs to dig a study and possible have more research to have an accurate result but trading is not all based on skill, fundamental or what so ever, 40% probably base on luck when you can guess the fluctuation where is the buying and selling point.

[senne]

I guess I’ll say a few commonplace things, but I can’t be silent.

My friend lost a lot of money in the last bitcoin move. The story is that he traded on signals.
Having a deposit of several thousand dollars, he received a signal (these were signal from one very famous trader, he trains him) to open a short position with a leverage of 2.5x at the level of approximately $ 8000 (I may be slightly mistaken).
As you know everyone was waiting for the fall of Bitcoin. My friend shared information with me, but I decided that I would spend this weekend without trading.

In general, before going to bed, my friend decided to check the market, and was delayed for 5 minutes. These 5 minutes decided everything.
He saw how the price of bitcoin began to grow at a frantic pace. He was shocked. At first he wanted to give the debt back to the exchange,
but it didn’t work out because he was sitting on the phone, and in the application from the Huobi exchange there was simply a disgusting procedure for returning the debt, absolutely not intuitive.

In general, when the price reached $ 10,000, he was already in a panic, did not know what to do, because the liquidation price was displayed as $ 10,200.
He frantically begins to buy Bitcoin for the remaining USDT, thereby increasing the liquidation limit, but he did not have time, and his position was liquidated.
He lost a significant amount, and fell into a rather severe upset.

Personally, I believe that all this could be avoided if:
1. Do not trade on signals
2. It doesn’t matter if you trade in signals or always set your own stop loss, even in the most obvious situations when it seems that there can be no other way.
3. Remember that margin trading can deprive you of your pants at any time. These are extremely high risks.
4. Be prepared for losses. If you take a risk, then accept responsibility for this risk at the time of opening a position, and not after its closure.


Be smart and take care of yourself guys.

That is the ultimate nature of margin trading. They are high on risk.
Never, I repeat never do margin trading on someone else's signals. They involve high risk and people often in blind trust of so called "trading gurus" ignore stop losses. Market is so volatile that putting tight stop loss becomes important and when it comes to margin trading, it becomes critical. I have seen many people being wiped by one sudden move in margin trading. People get greedy and ignore the basics of risk management.

[el kaka22]

Do not trade on signals is the most important part of this yet also not important at all as well at the same time. Now, you may say how is it that its the most important part but also not important at all, well simply if you trade on signals you are shifting the blame to someone else, you will certainly long or short your position yourself even if you do not use signal and you can definitely be wrong as well, so what if your friend didn't had any signals but decided to short himself without help from anyone else? What would happen?

Well, same would happen because bitcoin went up, so now we have a trader who gave a wrong signal that made your friend lost money a ton but at the same time your friend could have lost it all by himself without anyone's advice as well, which means bad signals are horrible but doesn't mean it is all their fault, your friend could have done the same.

[ChrisPop]

Yeah, your friend made some major mistakes, but they are hard learned lessons that are much better learnt on your skin then from someone else's experience. A few thousands dollars is not a fortune, but it is a decent amount but he must understand that being upset for his losses won't make the situation better, but much worse. So tell him to write the mistakes down and what I suggest in the future is for him to use cross leverage and a fixed stop loss in case anything bad happens.