Cryptocurrency Trading Types: Which is Safer?

in LeoFinance2 months ago

Cryptocurrency offers us multiple and various ways to earn from it and one those ways is cryptocurrency trading. There are also many types of cryptocurrency trading and they include; Peer-to-peer (p2p) trading, spot trading, margin trading, futures trading etc. The peer-to-peer trading as the name implies involves two persons exchanging cryptocurrency for Fiat and vice versa. Here, no third party is needed; just trust.

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In a nutshell, margin trading has to do with borrowing funds/capital from an exchange to use for trading. Thereafter, the borrower has to pay back with interest. Failure to pay back at due date usually attracts a fine. I for one do it like this cryptocurrency trading type and I don't advice my students to do so. However, it is not bad rather it is just a matter of choice.

Futures trading on the other hand has to do with price prediction. Here, a person stakes some amount of money and predicts that the price of a certain coin would either increase (longing) or plummet (shorting) to a certain level. Furthermore, if you prediction goes right, you gain depending on your capital and if it goes south, you lose or get liquidated in worst cases.

Now, which is safer?
Personally, I would opine that spot trading is the safest form of cryptocurrency trading. This is so because, in spot trading, the risk and chances of losing is very low. And knowing that risk management is very vital in any business, spot trading appears to be very safe.

Again, futures trading is very risky and I won't advice beginners and newbies to venture into it in a hurry. Yes! You can make lots of money trading futures but also you could lose massively within a twinkling of eye. It boils down to knowing what you are doing, knowing how to manage great and overcoming fear. I've experienced liquidations a few times and it is usually not interesting.

What's your take?

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I do understand your point on the P2P trading and future trading which you said is about predicting the future and carries a great risk.

The Margin is will not be one I'll like to give a try and I don't quite understand the spot trading, wish you can shed some light on it I am just waiting for the verification of my binance account so as to start trading probably by next year.

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I wouldn’t say there is a safer/riskier trading type. Of course some instruments like margin/leverage could be lethal into beginners hands but it’s finally a trader issue more than a trading type issue.
Any trading type can be safe, it boils down to 2 important trader skills: money management and trade plan.
To simplify, the first one defining the size of your trade and the number of different trades. And the second being a list of actions to be taken depending on specific situations (basically stop loss and take profit orders).

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For me, there's always a safer trading type and I always advice beginners to start with the safest which is spot trading...