Cryptocurrency platforms offer many different trading methods and strategies. One of theseways – trading with leverage.
Trading with leverage – or margin trading – this is one of the ways to quickly increase the capital with which a trader enters the market.
What is leverage and margin?
Leverage – this is a temporary loanprovided to the trader. It allows you to open a larger deal with less equity capital. Leverage is represented as a multiplier, which shows how much a trader's position differs from his capital.
If you trade without leverage and invest $1,000, for every 1% of the market movement you will receive or lose $10, which equates to 1% of the$1,000.
If you invested the same $1,000 and traded with x10 leverage, the dollar value of your position would be $10,000.1% of $10,000 is $100, so for every 1% of the market movement you can get or lose $100.
Margin – it is the relative amount required to complete a leveraged transaction, taking into account spreads and currency conversions.
Leverage tools
Each tool has a maximum limitleverage, which are regulated by industry regulations. Investors can trade tokenized ETFs, indices, commodities, stocks and currencies.
Maximum exposure also depends on the account type. Pro accounts allow you to increase your leverage.
The trader can open a short position" (Short positions) and "long position" (Long positions).
Short – this is a bet on the price fallingasset. Long positions, on the contrary, bet on the growth of an asset. If the price of the selected asset reaches the “liquidation price”, the positions will be automatically liquidated.
What is Margin Call
When margin trading losses exceed the balance of the trader's account, the exchange warnshis "margin call."
Margin Call – this requirement is increasedmargin account balance and post additional collateral for maintenance margin if the market moves against the trader's position. To satisfy the requirement, the user must either deposit additional funds or sell current positions. Otherwise, when a certain price is reached, the trader's position will be liquidated.
Minimizing risks when trading with leverage
Leverage trading can lead to increased profits in successful transactions, but also carriesthere are risk of increased losses.reduce potential losses.
Stop-loss: stop loss is used toclose a trade if the market moves by a certain amount against your position. You can set your stop loss according to a specific level in the market or as a monetary amount, which is also shown as a percentage of your initial investment in the trading window.
Take Profit: use Take Profit to automatically close your position when the profit on your trade reaches the amount you select.
The use of leverage is more risky as leverage increasesBefore using margins, we advise you to familiarize yourself with all aspects of margin trading and try your hand at a test account.
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