As I am sure you will all know, the magical formula for all types of trading is this. Your trading funds should be limited and the return should hopefully outweigh the investment. Simple. Yet reaching this holy grail is a difficult task. There are ways to help in this pursuit though and utilizing trading funds is the basis. This article will run through a few basic principles so that you can utilize trading funds more efficiently and effectively in the future, reaching that all-important formula more easily.
Step one: Fund Management
To start, what all traders must get a grip on in order for effective trading funds usage is fund management. Fund management will prevent loss of investment and let you maximize profits in a fixed risk situation.
Fund utilization rate is the formula behind fund management. This explained by the equation, the fund amount held in one’s positions divided by the fund amount held by one’s account equity. The formula is important as it is a risk control tool and if wielded correctly is perfect for useful and efficient fund management.
Step two: Derivative Trading
Another important factor is derivatives. Leverages and their flexibility has made derivative trading an effective tool. Traders can now long and short the market and intertemporal arbitrage/spot-futures arbitrage also improve the efficiency of fund use when combined alongside leverages. Not only that but on days of low volatility, traders’ fund returns can rise when making correct usage of leverage. Exchanges like OkEx, Bitmex, and others have made derivative trading easier. One example of this is OkEx’s derivatives big data platform, which is something that traders can use.
Step three: Exchanges
Some exchanges like OkEX can really help a trader reach that holy grail. A feature that some have is a daily settlement system. Unlike weekly versions, daily ones allow traders to remove funds in open positions, regardless of time. This gives a trader more control of their funds, making life easier.
Another way that exchanges can help is by allowing traders to store funds and then give them the ability to look after and use them more wisely. OK PiggyBank is one feature that exchanges use, and something which many beginners miss. The benefit of storing funds is that you can get around volatile and dodgy markets which could leave you burned. Others use it to make their portfolio more different.
So, keep these three steps in mind for when you start out trading. Your funds are the tools for success, so don’t neglect them. Good luck in your ventures and remember this in your pursuit of the holy grail of trading.