Whenever it comes to maximizing your trading profits, leverage is somETHing that we use. Leverage exists in all sorts of markets, be it stocks, forex, or crypto. It allows you to trade at a larger scale with little money. So you can maximize your returns.
If you are planning to leverage trade cryptocurrency but are not sure where to start, then this article can help you get started. Here, we will explain what leverage trading crypto is, how to leverage trade crypto, and provide some of the best crypto leverage trading platforms for you to consider. Let’s get right into it.
What is Leverage in Crypto Trading?
Put simply, leverage trading crypto is where you borrow funds from brokers and use them for your trades. This increases your buying and selling power such that you can trade with more capital than you actually own.
Also, depending on your crypto exchange, you can enjoy different levels of leverage. Some exchanges offer you up to 100 times your account balance. So if you have $100 in your account, you can trade with a balance of $10,000.
What is 10x Leverage in Crypto?
Leverage is typically described in a ratio such as 1:5, which gives you 5x leverage, 1:10, which gives you 10x leverage, and more. The ratio shows how many times your initial capital is multiplied. For instance, if you have $100 in your account and you want to open a BTC position with 10x leverage, then your $100 will turn into $1,000.
Leverage can be used for trading cryptocurrencies, crypto derivatives, futures contracts, and more. However, you should know that trading with leverage comes with high risks, which can lead to significant losses. If the trades go in your favor, you can easily make good profits. But if it does not, then be prepared to face huge losses too.
Hence, it is advised to the newbie traders to avoid using leverage when they are starting up or to use little leverage.
How to Leverage Trade Crypto?
To start with leveraged crypto trading, the first step is to deposit funds into your crypto trading account. Your initial capital deposit is your collateral. The collateral required depends on the leverage you use and the total value of the position or margin you wish to open.
For instance, if you wish to invest $100 in ETH with 10x leverage, then you will need a margin requirement of $10 in your account as collateral for the borrowed funds. However, you should not forget that the higher leverage you wish, the higher profits you will make and the higher losses you will face.
Apart from the initial capital deposit, you also need to maintain a margin threshold for your trades. When the market moves against you, and the margin gets lower than the maintenance threshold, you will be required to add additional cash into your trading account to avoid being liquidated. Also, you can use leverage for both long and short positions.
Best Crypto Leverage Trading Platforms
To start trading crypto with leverage, you are required to choose a crypto exchange first. Do remember the fact that not all the exchanges support leverage trading. So to make it super easy for you, here are some of the top exchanges where you can trade crypto with leverage:
Bybit:
Bybit is one of the top platforms for crypto leverage trading as per the CoinMarketCap active trading volume. The exchange makes it super easy to get started with crypto trading, and you can buy, sell or trade popular cryptocurrencies like Bitcoin, ETHer, Litecoin, Dogecoin, and more.
It offers a wide selection of crypto derivatives, perpetual and futures contracts, including ADA/USDT, BTC/USDT, ETH/USDT, XRP/USDT, and more. Talking about Bybit leverage, it offers you up to 100x leverage, which is one of the highest in the market. However, ByBit only supports leveraged trading for specific pairs.
Along with that, Bybit charges a 0.75% taker fee for market orders. Plus, you should also know that Bybit charges fees on the full position and not on your initial margin. This means you have to pay fees based on your leveraged position. So the higher leverage you use, the higher the trading fee you have to pay.
Binance Futures:
Binance is the world’s largest cryptocurrency exchange based on trading volume. And for leverage trading, Binance Futures is one of the best options out there for futures trading, enabling you to trade in 50+ trading pairs. Some of the popular cryptocurrencies that you can find on Binance are BNB, BTC, ETH, BCH, XRP, EOS, and many more.
Along with that, it offers you a wide range of products that allows traders to trade futures as per their choice. You can find different leveraged products on Binance, such as USD-M futures which are margin perpetual contracts, Coin-M futures which are futures contracts and traditional future contracts, and Binance leveraged tokens, which lets you trade crypto with leverage and Binance options for options trading.
FTX:
FTX is one of the newest crypto exchange platforms out there, which quickly made its name. It offers you one of the easiest ways to trade crypto and gives you access to one of the most competitive trading fees in the industry. The exchange has index futures as well so you can trade in any segment of your choice.
Talking about FTX, it offers you 101x leverage on all FTX leveraged tokens. However, the maximum leveraged position is set to 10x as a precaution. Apart from this, you can also trade in options, move contracts, spot markets, and prediction markets.
FTX also offers you one of the lowest trading fees compared to other crypto derivatives exchanges. It follows a tiered fee structure which is common across most exchanges. Under tier 1, you have to pay 0.020% maker fees and 0.070% as the taker fees.
Risks of Trading Crypto on Leverage
Of course, leverage trading helps you to maximize your profits. But we cannot ignore the fact that it involves high risks. And getting into leveraged crypto trading without knowing the risks might not be a good idea. Here are some risks you should be aware of before you get into leverage trading:
- With leveraged crypto trading, there is a good chance that you will end up losing more money than you have invested.
- If trades don’t go in favor of you, you might have to deposit additional cash in your crypto trading account to meet the margin call needs or cover the market losses.
- You might have to sell some or all of your holdings and take a loss when using leverage for crypto trades.
- Your crypto exchange might sell some or all of your assets without consulting you to pay off your margin loan.
However, there are a few ways you can reduce your losses. For instance, you can use lower leverage when trading, invest what you can afford to lose, and use proper stop loss, which will help you to minimize significant losses.
Why Leverage Trade Crypto?
The primary reason for using leveraged trading is to increase your position size, so you can expose yourself to higher profits. Leveraged trading is a way to gain good profits but also face huge losses.
By using leveraged trading, you will be able to enhance the liquidity of your capital. For instance, instead of holding a 2x leveraged position on a single exchange, you can use 4x leverage to maintain the same position size with lower collateral.
As a result, you will be able to use other funds to earn money from crypto in different ways. Such as trading another asset, staking, providing liquidity to decentralized exchanges (DEX), investing in NFTs, and more.
Closing Thoughts
That is all about how to leverage trade crypto along with a few of the best crypto leverage trading platforms. Leverage trading is a great way to potentially maximize your profits, but also expose yourself to higher risks at the same time. Hence, before getting into it, make sure you have some mastery over trading, technical analysis, and other key elements of trading.
