Can you explain that a bit? How would much losses be limited?
Excuse me if you know most of what I'm about to say. So with forex (foreign exchange) you basically buy currency with the expectation that it will increase in value, then you sell it for more.
So if you bought £100 worth of USD at a rate of 1.30 you would receive $130. The value of the dollar goes up to $1.32 and you sell it back to pounds and you've profited roughly £1.50. But, there are margins involved which are effectively the brokers charge so you would hardly make any money.
So that means is that you effectively need to invest a lot more money to get a profit that's actually beneficial. So if you put in £10,000 at the same rates that profit goes to £150. But, that's a lot of money to put up to get a measly £150.
So what brokers offer is leverage. What they do is effectively
lend you money to invest with. So say your broker offered you a leverage of 50:1, they will lend you 50 times more than your investment. So if you went back to your original investment of £100, they would lend you 50x more so you're actually trading with £5,000 for just £100. So you get the profit of a £5,000 trade.
But you also get the losses of a £5,000 trade. Leverage is good as it opens up the whole market with a little amount of money
if used correctly.
Going back to Bitcoin. Most platforms have 'stop loss' controls that you set on them so basically if the currency hit a certain drop it would automatically sell and stop you making a monumental loss. But keep in mind that trades go up and down so you need to allow breathing space.
I trade with forex every day
