How these markets move.
WHAT MAKES THEM DISTINCTIVE
Trading continuously, without pause Limited regulation in many venues Substantial influence from sentiment High leverage available Concentrated holdings
WHAT VOLATILITY LOOKS LIKE
Movements in a day exceeding what traditional markets see in months.
WHAT LIQUIDITY MEANS
How much can be traded without moving the price.
WHY IT MATTERS
Thin markets move sharply, and exiting a position may be impossible at the quoted price.
WHAT MARKET MANIPULATION LOOKS LIKE
Coordinated buying to raise a price, followed by selling into the demand False volume created by trading with oneself Coordinated promotion of an asset
WHY IT IS PREVALENT
Limited oversight, and assets with concentrated holdings.
WHAT LEVERAGE DOES
Multiplies both gains and losses.
WHAT LIQUIDATION MEANS
A position closed automatically when losses approach the collateral.
WHAT THAT MEANS PRACTICALLY
Leveraged positions are frequently closed at a total loss during ordinary volatility.
WHAT TO UNDERSTAND
That most participants using leverage lose money.
WHAT DERIVATIVES ADD
Complexity and further risk.
WHAT THIS CATEGORY DOES NOT DO
Advise on trading. These markets carry substantial risk of total loss, and information here is explanatory only.
