- A British amateur leverage trader told last week how his life savings were wiped out in one go
- The man reported how a 6% Bitcoin move was enough to liquidate him
- The event once again proved why leverage trading is both unnecessary and risky
A cautionary tale that did the rounds in the UK press last week has shown the folly of leverage trading for those with no experience of it. A husband leverage traded the entire life savings of himself and his wife and lost it when Bitcoin fell from $50,000 to $47,000 recently, leaving him liquidated and facing the wrath of his wife…when he tells her. This is yet another example of why leverage trading should be left to the professionals, especially in an ecosystem where patience can net you four-figure returns.
Life Savings Liquidated in 6% Bitcoin Move
The man told how he had used leverage trading to get from ₿1.7 to ₿2.1 by longing Bitcoin in mid-August, which represented all the life savings of not just himself but his wife as well. However, with Bitcoin at $50,000 he went long again, only for it to drop to $47,000 over the following days. This drop was enough to liquidate him and meant that “our whole life savings have been wiped out”. The man urged readers not to “fall into these marketing traps like I did”, presumably referring to the high leverage offered by exchanges to entice big wins…but also big losses.
The fact that the man was liquidated after just a 6% move highlights the dangers of leverage trading for those who are not experienced in it. There are a variety of parameters able to be set in such situations which helps to mitigate potential losses, while training and experience can also help to prevent liquidation when things start to go south.
Leverage Trading Plays on Greed
There is only one reason why amateurs are sucked into leverage trading – greed. They see the stupendous gains made on crypto Twitter and potentially in trading groups and, combined with the tempting amounts of leverage offered by exchanges, get the dollar signs in their eyes without thinking of the downside.
However, if leverage trading in itself is inadvisable for those who aren’t experienced in it then putting your entire life savings into crypto is lunacy full stop. There is a reason for the saying ‘never bet more than you’re willing to lose’, and sadly as this gentleman found out there’s a reason for this.