An Efficient Guide to Crypto Leverage Trading

Leverage Trading

During your trading career, you will almost certainly deal with leverage. Even if you hold significant funds, you will want to increase them to be able to make more trades and gain greater rewards. Keep reading to learn the basics of leverage trading and tips on how to use it effectively.

What Is Leverage?

Leverage is a type of margin trading. It’s a common tool in both traditional and cryptocurrency markets. If you’ve ever traded on Forex, you won’t struggle with leverage trading in the crypto market.

Most common crypto trading strategies come from years of experience that you can learn and adjust to your personal trading goals.

You open buy and sell trades borrowing capital from a broker so that you increase the funds you can operate with.

Derivative trading can be done with limited funds. Even if you plan to trade the BTC/USD pair, you don’t need to deposit $60,000 to your trading account. However, the sum you own will determine the position size that will affect your potential income (and loss. Remember that trading doesn’t guarantee 100% winning trades). Leverage can increase your financial opportunities by up to 100 times – having $100; you can operate for $100,000.

Leverage is provided by almost all trading platforms. However, it increases the risk of financial loss. Therefore, it’s vital to find a reliable broker. The Margex platform is one that will help you operate in the highly volatile crypto market and reduce the risks.

Leverage Trading: Advantages

Here are the main reasons that make traders use leverage.

Efficient Trading

Imagine you have only $100. How much time do you need to save, at least $1,000, to open a considerable trade? As the crypto market is highly volatile, you need to react to the opportunities it offers fast. Using margin trading, you can open numerous positions fast without saving up money for months.

Diversified Portfolio

Diversification is a key to successful trading. When diversifying, you balance possible losses with potential income. You shouldn’t put all your funds in one cryptocurrency. The more funds you own, the more trades you can open and hedge the risks.

Increased Income

We have mentioned this point several times. Potential income correlates to the size of your capital – the larger your positions/number of trades, the more you can gain.

Leverage Trading: Pitfalls

Increased risks are the main pitfall you should consider when applying leverage trading. Multiplying the amount of funds you deal with, you magnify the losses you could suffer if the market turns against you. Margin trading can lead to losses exceeding your initial capital.

Leveraged trading is available for newbies and professional traders. However, it requires extra caution from beginners because they need to know how to calculate funds and losses they can bear. Nevertheless, this isn’t a reason to avoid margin trading.

Takeaway

If you want to gain more, you need to be ready to lose more. This rule applies to all aspects of finance, including leverage trading. However, leverage trading has a significant advantage – it widens your opportunities.

Disclaimer: While providing more trading opportunities for trading, leverage multiplies risks. Applying money management tools is recommended to balance potential rewards and losses.

Last updated Aug 27, 2022

Share this page:

Binance 10% Offer

Latest Posts

What Are Perpetual Contracts (PERPS)?

What Are Perpetual Contracts (PERPS)?

What are Perpetual Contracts (PERPS)?Perpetual contracts, also known as perpetual swaps or simply "perps," are a type of derivative contract that allows traders to speculate on the price of a particular asset without having to physically own the...

What Is Annualized Percentage Yield (APY) in Crypto?

What Is Annualized Percentage Yield (APY) in Crypto?

What Is Annualized Percentage Yield (APY) in Crypto?Annualized percentage yield (APY) is a term used to express the annual rate of return on an investment, taking into account the effect of compounding interest. In the context of crypto, APY is...

What is Wash Trading in Crypto?

What is Wash Trading in Crypto?

What is Wash Trading in Crypto?Wash trading is a form of market manipulation in which a trader buys and sells a security for the purpose of creating artificial activity in the market. This is done in order to deceive other market participants...

What Is the Crypto Fear & Greed Index?

What Is the Crypto Fear & Greed Index?

What is the Crypto Fear & Greed Index?The Fear & Greed Index is a tool used to measure investor sentiment. It is based on a scale of 0 to 100, with a value of 0 indicating extreme fear and a value of 100 indicating extreme greed. The...

What is the Metaverse?

What is the Metaverse?

What is the Metaverse? The metaverse is a collective virtual shared space, created by the convergence of the real and the virtual. It is a concept that has been explored in science fiction for many years, but it is becoming increasingly relevant...

Top Rated Exchanges

Top Rated Brokers

Top Rated Wallets

Roobet

Latest Reviews

MoonXBT Review

MoonXBT Review

MoonXBT Review 2022MoonXBT Review Summary MoonXBT is a trading platform that aims to take your investment to the moon with the innovative means of social trading. MoonXBT is based in the Cayman Islands and has offices throughout East Asia and...

PrimeXBT Review

PrimeXBT Review

PrimeXBT Review 2022 PrimeXBT Review Summary The PrimeXBT cryptocurrency exchange is a one-stop-shop trading platform that supports trading cryptocurrencies, most major stock indices, commodities, and foreign currencies. They have quickly become...

MEXC 10% Trading Fee Discount

Pin It on Pinterest