In this lesson
- find out what hides behind the most tempting buttons in an exchange app
- understand why beginners lose money on them fastest
- get a simple rule for when to touch them
An exchange app is built to keep you as long as possible and to make you trade as much as possible. So the shiniest buttons usually do not lead to what a beginner needs. Professor Wick has a simple rule for them: if you do not know exactly what a button does, do not touch it.
Futures and leverage#
Futures and perpetual contracts let you trade with leverage: with 10x leverage, a 10% price move against you wipes out your whole stake – in practice liquidation comes even a little earlier. Then comes liquidation and the money is gone. The futures screen looks almost the same as spot – which is why lesson 5 advised checking the tab. More in the lesson Spot vs. futures.
Margin#
Margin is trading with money borrowed from the exchange. You pay interest, and in a fall the exchange can liquidate you just as with futures. For a beginner, no difference for the better.
Earn and staking on the exchange#
Earn, savings or staking promise interest on crypto. But the exchange lends your coins on or stakes them for you – and you carry the risk that something goes wrong. The lending platform Celsius offered high interest in 2022, then froze withdrawals and went bankrupt. Before turning on Earn, find out who does what with your coins and whether you can withdraw them at any time.
Copy trading#
Copying "successful" traders looks like easy money. But you only see those doing well right now – those who lost money have dropped off the leaderboard. And many of them trade with leverage.
Launchpools and new tokens#
New tokens for free in exchange for locking other coins or joining a sale. New tokens' prices often fall sharply after the first days – and your locked coins may not be sellable in the meantime.
Bonuses#
"A 100 euro bonus for your deposit!" Read the terms. The bonus is often usable only on futures, or you get it only after trading many times your deposit. It is bait for trading, not a gift.
Beginners lose the most on these products
According to regulators and the exchanges themselves, leveraged trading is the most common way for a beginner to lose money fast. First master spot with money you can afford to lose – and do not take anything in this lesson as a recommendation.
Common myths#
- "With leverage I will make more." And lose faster too – and liquidation does not wait for the price to come back.
- "Earn is like a savings account." There is no deposit insurance, and the exchange holds and lends the coins.
- "I copy the best trader, I cannot lose." The leaderboard shows those who have survived so far.
Summary
- Futures and margin = leverage and liquidation; the fastest road to losses for a beginner.
- Earn and staking on the exchange add the risk of what the exchange does with your coins.
- Copy trading shows the survivors, launchpools tempt with new tokens, bonuses tempt you to trade.
- The rule: if you do not know exactly what a button does, do not touch it.