Derivatives Trading Risks
Derivatives Trading Risks: A Beginner's Guide
Welcome to the world of cryptocurrency trading! You’ve likely heard about ways to trade beyond simply buying and holding Bitcoin or Ethereum. One of those ways is through *derivatives trading*. This guide will explain what derivatives are, and, most importantly, the significant risks involved, especially for beginners.
What are Cryptocurrency Derivatives?
Think of a derivative as a contract whose value is ‘derived’ from the price of another asset – in our case, a cryptocurrency. You’re not actually buying or selling the cryptocurrency itself; you're trading a contract *based* on its price.
A common type of derivative is a *future contract*. Imagine you think the price of Bitcoin will go up next month. Instead of buying Bitcoin now, you could buy a Bitcoin future contract that lets you buy Bitcoin at a specific price on a specific date in the future. If Bitcoin’s price rises, you profit from the difference.
Another common derivative is a *perpetual swap*. Unlike a future, a perpetual swap doesn’t have an expiry date. It’s a contract to buy or sell cryptocurrency with ongoing settlement. Register now is a popular exc
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⚠️ *Disclaimer: Cryptocurrency trading involves risk. Only invest what you can afford to lose.* ⚠️