Every person who is affiliated with the stock market, forex, and crypto currencies knows how to place an order and sell an order might be in profit or might be in loss. Though it is a traditional form of trading there are many other options in the market which a user can use to leverage their gains or losses in the crypto field.
Yes you heard it right, future trade can either leverage your gains/profits or losses. Let me give you an example, first we take the scenario where person A engage in spot trade and the exchange he uses is Binance(not promoting though). Now what happens is if A has a capital of $1,000 USDT then by doing spot trade he can only place an order of a coin or multiple coins up to $1,000. Suppose A purchases two coins and put 50% in both of them which means $500 worth of Bitcoin and Ethereum.
Now if the price of BTC rises up by 10% and Ethereum also by 10%. Then A will make a profit of $100 by selling at current market price. This way he earned a profit of 10% on his portfolio investments. Consider the other way in which the price of BTC and ETH dips by 10% each, then A will incur a loss of $100 on the investments. This is fairly simple no hassles a price increase gives profit and a decrease result in a loss.
Now things get a little raunchy when we practice this scenario in leverage trading. In future trade depending on the exchange the person A can get a loan from the exchange for a small cost to buy coins more than the capital A possess.
For example, if A engage in future trade on Binance and takes a leverage of 10x which means his investment will be multiplied by 10 and that amount worth of crypto investments A can make into the market. Suppose A has $100, and he takes a leverage of 10x, this means he can buy $1,000 worth of crypto. But in the case of future A has to depict the future case scenario of the coin if he selects to buy/long that means price will increase then that means a 10% on his investment becomes a 100% in absolute terms when the margin is removed. Similarly, a 10% loss on his investment can result in A losing all the money invested in the trade.
This instance depicts that future trade is not a spot for gamble but is a place where experienced traders reap the benefits of their expertise in the market.