Leverage trade is the trade of the brave and ambitious traders. If you are aspiring to make it big in the trade world, you have to aim higher. The major USP of leveraged trading is that it enables traders to set their sight on higher trading positions and greater profits even when the traders are unable to share a lump sum amount from their own wallet. This one particular aspect has single handedly leveraged the appeal of leveraged trading in the trading scene, including the relatively new crypto scene. Check out more at Multibank.io.
Do you too wish to get started with leveraged trading in the crypto market? Well, in that case, this post is all you need to ensure a successful and safe experience with leverage trading. We will discuss in detail how to enter the leveraged trading market but prior to that let’s understand the key aspects of crypto leverage trading.
Leveraged trading in crypto
Leverage trading implies trading with extra boost- in the trading sector, this extra boost comes in the form of additional funds. Put simply, leveraged trading is about trading with lent or borrowed funds. Now, from where can you borrow the funds for leveraged trading? It’s the crypto trading platforms, the crypto exchanges that will offer you additional funds for crypto leveraged trading.
No discussion on leveraged trading could be complete without the mention of “margin”. A leverage trader will have to deposit two types of margin amounts to take part in crypto leveraged trading. One is the margin amount that he would deposit while creating an account in the crypto exchange. The other margin amount will help to maintain the leveraged trading position that he opens with the crypto exchange. The margin will serve as the collateral for the borrowed funds.
In regard to leverage, you can choose from 1x to even up to 100x leverage for crypto leveraged trading.
A major advantage of leveraged trading is that it enables you to trade not just in long but also in short.
When would you opt for leveraged trading?
The most common circumstance is when you have the prediction that your chosen crypto might soar to newer heights in the coming days – and you wish to attempt for higher trading positions as higher positions offer larger profits. But, you are short of a lump sum trading capital. In that case, leveraged trading offers the facility of trading with borrowed funds. Thanks to the leveraged support, you won’t have to miss out on the opportunity of higher profit just because of cash crunch.
Things to do to participate in crypto leveraged trading
We will discuss the steps to be followed while taking part in leveraged trading through a crypto exchange. But, before that, every aspiring leverage trader should perform and consider some major aspects to land up with informed trading decisions and better opportunity of profit.
Choose the crypto wise
Do not go for any random crypto abruptly. Look for a crypto that offers high liquidity and commands high demand in the market. Cryptos with low liquidity make it extremely difficult to find buyers and preferred selling prices.
Follow Technical Analysis
You will need to follow TA before you open the leveraged trading position with a crypto exchange.
The analysis will help you to find an estimate about the graph of growth of your chosen crypto. TA uses charts, graphs, and historical analysis to find out the future graph of a crypto. There is no point in opening a leveraged trading position now if your chosen crypto shows a possibility of growth after 6 long months and a flat market at the present moment.
How much leverage?
As mentioned above, leveraged trading in the crypto scene will enable you to choose up to 100x leverage, if not more. But, if you want to keep it safe, please try to stick to lower leverage, especially if you are just starting out in crypto leveraged trading. Start with 2x but not go beyond 5x. Higher leverage offers opportunity for higher profit but greater leverage also exposes you to risks of bigger loss.
How much margin?
You will have to maintain the maintenance margin for as long as you mean to keep the trading position active. Now, you should know two things about crypto leveraged trading. The profit potential is always higher in leverage trading compared to other forms of trading. It’s because, in this case, you have the opportunity to trade with borrowed funds that will amplify your overall trading capital even when you can’t provide much from your own share. Now, if your trade makes a profit, you will be able to earn magnified profit because here the profit will be calculated on the amplified capital.
On the other hand, if your trade meets with loss, the loss too would be higher than other trading methods as here the loss will be calculated on the amplified fund. And if you encounter loss, the whole margin will get liquidated. In that case, the exchange will immediately send you a margin call reminding you to refill the margin. If you are unable to refill the margin, the leveraged trading position will get closed. So, make sure to choose a margin level that would be easier to refill in case your existing margin gets liquidated.
Steps to follow while participating in crypto leverage trading
Let’s assume that you have already created an account with your chosen crypto exchange for leveraged trading.
Now, go to the section that displays information on account balance. You will find a tab for “Margin”. Click on that tab. Then, you will have to approve the agreement for the Margin account. After you approve it, the exchange will allow you to send funds to the right Margin Wallet.
Next look for a tab that features “Borrow or Repay”. As you will click on that tab, you will be asked to put in your preferred borrowed amount. Check the interest rate per hour. Now, click on the “Confirm/Borrow” tab. Go to the “Balance/Margin” section to see if you have received the funds.
Head to the “Exchange” page and look for the “Margin” tab. Click on it to commence leveraged trading.
Just make sure to settle with an exchange that charges affordable fees.