Cryptocurrency trading implies many different strategies. Some strategies are developed for use in the long term; others suggest making small positions of profit many times within one day. Some strategies allow to make money in a growing market; others enable making significant profits when the market drops. Some strategies bear many risks; others are less risky.
What Is Leverage In Trading Crypto?
When you have a small amount but are willing to invest and make a profit, you can use a high-risky tool – leverage crypto trading. Leverage may be X5, X20, or even X100. It indicates the figure that multiplies your initial investment.
Funds are borrowed from a crypto exchange you work with. It may be a specially created reserve of funds or other crypto holders that want to lend their assets and receive interest.
Margin trading bears risks, so it is represented on only credible crypto exchanges like Binance, KuCoin, ByBit, and WhiteBIT. That are the same platforms where you used to buy cryptocurrencies and trade them, but with additional trading tools for advanced traders.
The advantages of leverage trading crypto:
- You have a chance to get greater profit having invested only a small amount.
- If you are confident about your investment, you can increase your holdings many times with much less capital.
- In some sense, you even control your risks. By picking the leverage size, you pick the risk you are ready to take.
How Leverage Crypto Trading Works
Suppose, you have $500. You use the leverage of X50. If the asset’s price changes in the opposite direction (drops) even by 2%, the exchange will close your position automatically, and you lose your initial amount. If the asset rate grows by 2%, you earn $500. Without using leverage, you would earn only 10%.
Margin trading bears high risks, so we recommend using small leverages first. To learn more about this type of trading, look for information in the White Blog. It is a resource with helpful guides and articles on trading using different strategies and tools that will be useful for both beginner and advanced crypto holders.