What is Leverage Trading?

f you’re looking to turn up your purchasing power and maximise those profits, then you’ve come to the right place because we’re about to teach you how to leverage Crypto.

The simplest explanation is that when you are ‘Leveraging’, you are using borrowed capital/funds to make your trades so that you can increase your profits, as much as possible which allows you to trade with fiat you don’t necessarily have.

Leverage Trading is great for everyone but specifically users who are trading with minimal capital because centralised exchanges like ByBit allow users to trade and leverage up to 100x on some cryptocurrencies!

But remember, with great power, comes high risk and responsibility!

WARNING – Only for those with HIGH-RISK TOLERANCE

Understanding how Leverage Trading works

So, let’s say you wanted to invest $100 into Bitcoin with a 10x leverage, then the ratio of what is required would be 1/10 of your desired amount, $100. Therefore, only $10 would be required to be kept in your CEX account.

However, if you wish to leverage by 50x or beyond, less required capital may be needed (e.g. 1/50 of $1,000 = $20), but the higher the ‘x’ leverage, the higher the risk.

Generally, Leverage will be represented by a ratio, such as 1:10 (10x), 1:30 (30x) or 1:100 (100x) which displays the multiplicity of your initial capital.

E.g. You open a $1,000 short/long position on Bitcoin. Except, you have only $100 in your CEX account, however, the $100 has the same purchasing capabilities as $1,000 with a 10x leverage!

The 10x Leverage you are receiving ($1,000) is borrowed capital and will have to be paid back, one way or another. It is important to trade with responsibility.

Before you have the ability to borrow capital and start Leverage Trading, it is required to have initial capital that is deposited into your account, which is also referred to as collateral.

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The difference between Short & Long Leveraged Positions

Users can Leverage Trade using both Short & Long positions, so it’s important to understand the difference, let me explain:

Leveraged Short Position

Also known as Shorting, is when you are selling your crypto at a higher price so that when the price drops you are taking profit.

Short Position Example (Leveraged) - With the same example above (Understanding How Leverage Trading Works), you open a $1,000 short position on Bitcoin $BTC and you have $100 as collateral, but as you are using a leverage of 1:10 (10x) you are able to sell $1k worth of $BTC.

Let’s assume Bitcoin is $50k and you borrowed 0.02 $BTC and sold it. If Bitcoin drops 10% to $45k, you can buy 0.02 $BTC for $900, which would net you $100 profit, excluding any trading fees involved.

Now let’s assume that the price of BTC didn’t drop 10%, but instead increased 10% to $55k, you would need to buy back the 0.02 $BTC, which would cost you $100 more.

Leveraged Long Position

A Long trade is the opposite of opening a Short, as you predict the price of the crypto will go up later and your crypto will be sold for a higher price when you close your position.

Long Position Example (Leveraged) - A Long position is the opposite of the example above (Leveraged Short Example) s, you open a $1,000 long position on Bitcoin $BTC and you have $100 as collateral, but again are using the power of a 10x leverage or 1:10.

Let’s assume Bitcoin is $50k and rises 10% to $55k, you will earn a profit of $100, excluding trading fees. Although, if the price of $BTC falls 10%, your initial $100 capital/collateral is forfeited and liquidated.

That’s why it’s important not to risk anything you can’t afford to lose. There are a few things you can do to prevent yourself from such catastrophic events.

So, before you open any position, it’s vital to understand and manage Leverage Trading Risks.

Understanding & Managing the Risks of Leverage Trading

One of the main and most important things to realise is that you may be able to enhance your profits massively, but you can also magnify your losses beyond what you originally had as capital, for the trade.

This is why we must learn to manage our Risk, which can be done by following these specific methods:

• Stop Loss- This is the most important tool you will use when trading as it will protect your profits. To use a Stop Loss, enable it by setting a price you don’t want the crypto to go higher/lower than.
• Take Profit- Opposite to a Stop Loss, the Take Profit function is when you set the price point you want the CEX to then close your position, taking the desired profit.
  

And of course, do I have to mention to you degens… BE RESPONSIBLE! Leverage a maximum of 5% of your portfolio at a time, not even. Do your own research into the crypto asset before investing and follow our official Discord & Telegram channels!

Why should I Leverage Trade Crypto?

Well, if you are one for making orchestrated risks that could net you 100x your original profit, then leverage trading is probably best for you. Leverage trading isn’t for everyone, as not everyone wants to have the possibility of getting liquidated, which does happen all the time!

As mentioned above, follow all the safety steps to prevent yourself from liquidation. Trade with care, responsibility and knowledge and you will prevail!

Let us look at some Pros and Cons of Leverage Trading:

Pros

• Ultimate Purchasing Power! - Having the ability to maximise your profits upwards of 100x is almost a superpower, with extreme risks involved.
• Experience - This is the key to becoming great in whatever you do. Trading with leverage will unlock new lessons, ideas and possibilities.
• Flexibility - If you don’t have that much capital, leverage trading can help you increase and build up your crypto portfolio so much faster.
  

Cons

• Liquidation - This must come top of the list. You can not put yourself in a position to lose something you can’t afford.
• Confusion - For beginners, leverage trading can be very dangerous and it is advised to start small or find a mentor/friend.
• High-risk tolerance - Those who leverage trade will need bulletproof risk tolerance as they will come across challenging situations.
  

Now that you understand how to leverage trade cryptocurrencies, what risks are involved and what the pros and cons are, it’s time to find the right platform for you to perform these trades.

Where can I Trade Crypto with Leverage?

The most popular platforms that users will trade on are centralised exchanges (CEX) such as Binance, ByBit, BitGet and many others.

However, there are now decentralised exchanges (DEX) such as PancakeSwap (BNB Chain) or GMX (Avalanche & Arbitrum networks) that allow users to leverage trade all through their DeFi wallet, like Metamask.

We have promotions running on some of the Leverage Trading platforms listed below, take advantage of them while they last!

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Centralised Exchange (CEX)

• Binance - The most popular CEX in the world
  

• ByBit - EARN UP TO $30K in DEPOSIT BONUSES
  

• BitGet - Trade on BitGet and receive 0% Deposit Cashback + $5,000 DEPOSIT BONUSES
  

Decentralised Exchange (DEX)

PancakeSwap DEX is the most popular protocol on the Binance BNB Chain. They have integrated a perpetual trading platform, which allows users to leverage up to 200x their capital!

PancakeSwap Website

GMX is a Decentralised Spot & Perpetual Exchange which allows users to leverage trade major cryptocurrencies with up to 50x leverage and is currently home to the Avalanche and Arbitrum networks.

GMX Website

Do you still need help with Leverage Trading Crypto?

If you are still unsure of how to trade crypto with leverage, or you need help finding cryptocurrencies to short/long, then you can join our free/premium discord community of over 8500 members, with 6 professional Traders who provide the community with calls 24/7.

Our community receives free crypto information, like the information you’re reading on this website, project reviews, trading calls with specific key details needed to pull off the perfect trade and round-the-clock support if you ever need it!

Join us on Discord today, its FREE!

If you found this article helpful, you might be interested in our Staking guide which will help you start your Crypto Passive Income Journey!

NFA DYOR