Crypto leverage trading is for all those ambitious traders who dare to live life king-size. Leverage trading holds the potential of magnified profit- most importantly, this trading strategy enables traders to aim for higher profits even when they don’t have an enormous trading capital. The major reason why ambitious traders love leverage trading is that it allows traders to trade with borrowed funds. If you are aspiring to opening a large trading position but apprehensive of a strained budget, leverage trading will be the perfect option for you. Crypto exchanges will offer you the additional funds needed to add leverage to your trading capital. Check out more at Multibank.io.
So, how do you set leverage in your trading account? We will discuss the steps in detail but before that, let’s have a few words about crypto leverage trading in general.
Leverage trading is a type of trading method that allows traders to trade with additional funds when they are unable to put in a large trading capital from their own pocket. The range of leverage in leverage trading starts from 2x to 5x to 10x and can even stretch to 100x, if not more. The leverage will be multiplication of the base trading capital that you will be able to submit to the trading platform, say crypto exchange. So, if your base capital (your own share) is $100 and you opt for a 2x leverage, you will be able to borrow $200 from the crypto exchange.
Margin is the blood and soul of leverage trading. Leverage traders will have to deposit a basic margin amount for opening the trading account. Additionally, you will have to put another sum of money as a “margin” that will serve as the maintenance margin. The margin quotient acts as the collateral based on which the crypto exchange will provide you the leverage for leverage trading.
In leverage trading, the official terms for the margin are Used Margin and Usable Margin. The first one refers to the security deposit that your broker needs to keep your leverage trading position open and active. The second one is required in your account to open new trading positions.
You should be careful about margin calls from your leverage trading platform aka crypto exchange. As mentioned above, you will have to maintain the maintenance margin to keep the trading position active. But, if you end up with a loss, the margin will get liquidated. In such a situation, you will have to refill the liquidated margin amount as fast as possible. If you can’t refill within a specific time, your leverage trading platform will close your trading position. However, before closing the trading position, the crypto exchange will send you a margin call to remind you about the margin refill.
Steps to Take While Setting Leverage in the Trading Account
Here are the few simple steps to follow while setting leverage in your leverage trading account.
Step 1 Add Margin
Let’s hope you have already chosen the specific crypto for leverage trading. Let’s say, you have chosen BTC. Now, go to your trading account, press on account balance, and then click on the tab that says “Margin”.
An agreement will come up. Read it and then click on “I Understand”. After that, you will be taken to a page where you will be able to send funds to add margin to your leverage trading account. On the new page, there will be two sections- one will be for “Buy BTC” (since you have chosen BTC) and the other for “Sell BTC”. Go to the “Sell BTC” section and look for a tab that says “Transfer”. Click on that tab.
Step 2 Borrow leverage
Once you transfer the margin, you will be taken to a page that will enable you to borrow leverage. There will be a tab that will look like “Borrow/Repay”. Since you want to borrow money now for leverage trading, you will have to click on “Borrow”. Put how much you have to borrow. But, before that, just make sure to check the interest rate (hourly) for borrowing. After you have checked the details and agreed to them, you can click on “Confirm Borrow”.
In a while, the requested funds will be added to your leverage trading account. Check the Balance/Margin tab to get the updates.
Step 3 Trade
Once you get the funds, you can begin leverage trading immediately. For that, you will need to switch to the “Exchange” page as this is where all the trading activities take place. Once you reach “Exchange”, click on the “Margin” tab to kickstart your leverage trading journey.
Step 4 Repay
It’s self-explanatory that you will need to repay the funds borrowed for leverage trading. When you are ready to repay the lent funds, go to the “Borrow/Repay page. Choose “Repay” and click on the tab. You will be asked how much you would like to repay at the moment. Enter the desired amount and the chosen coin. Click on “Confirm Repayment”.
We will wind up the article with a few tips and suggestions about crypto leverage trading.
First, you should choose a coin/token that commands high liquidity and trading volume. This way, it will be convenient to sell the coin at a high price and earn a magnified profit. Then, be careful about the margin in your leverage trading. It has been mentioned in detail that you might need to refill the margin at times, especially if your trade ends up in a loss. So, make sure to deposit a sum of the margin that you will be able to refill on short notice.
Besides, you should also be mindful of the level of leverage you will opt for in leverage trading. If the market moves in your favour, you will be showered with astronomically high profit. But, if you end up with a loss in leverage trading, you will lose out on the entire money. On top of that, you will have to refill the margin and repay the borrowed funds. So, it’s better to stick to small leverage levels.