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Leverage Trading with Cryptocurrency

What is Leverage trading?

Leverage is a trading mechanism you can use to increase your overall exposure to the market. This allows you to pay much less than the full amount of the investment. The main purpose is it allows a trader to take on a greater position in a stock without having to pay the full price (ex. $1 x 100 = $100 position). Essentially, your gains or losses are maximized depending on the multiple of leverage you choose to apply. Some exchanges only offer up to 3x leverage while others can go as high as 1000x. However, it is strongly recommended not to use the full amount of leverage as we will explain shortly.

BTC Perpetual Futures on Kucoin

Kucoin offers futures trading a number of coins. Users can trade up to 100x leverage on coins like BTC, ETH, SHIB, SOL, LTC, etc.

What are the benefits of leverage trading?

Useful Terms (hover for definition):

Liquidation

When the leverage position taken has seen a loss that exceeds the amount of equity (collateral) in an account.

Equity

The value of the stake in your trade.

Margin

The amount of funds borrowed to trade.

What are the Pros & Cons of Leverage Trading?

The pros are somewhat obvious as users can gain more exposure to the market and as result yield a bigger return. It is often seen as a solution for retail investors to maximize their return as opposed to buying & holding or day trading with small amounts. What could made from 10-100 successful trades can be made in just 1-2 trades with leverage. So one can argue, while your exposure is greater, the amount of times you will expose yourself to reach your profit targets should decrease.

With Leverage trading there is always a risk of liquidation. The more leverage you take on, the more likely it is you will be liquidated. So, imagine if you were trading BTC perp and you went Long (betting the price will go up) and it does the exact opposite, without a stop loss in place, you could drop deep down into forced liquidation. Another thing to consider is your total equity which can act as collateral. This is why  it is important not to use too much leverage because if your position results in a loss, your equity can provide temporary support. 

Is Leverage trading right for you?

This is a question best answerd by yourself, but if you would like to have greater exposure to the market and accept this exposure can result not just in greater return but greater loss, then doing a few small test trades won’t hurt. However, leverage trading is not something to take lightly. You can literally lose your all your money if proper precautions are not taking (i.e. no stop loss, no take profit set). 

Scenario: I put $47 on ETH with 100x leverage while at the same time, I only have $50 total in my account. This means I am using over 90% of my available margin on this trade which puts me at great risk of liquidation. Given the high volatility of cryptocurrency (prices can fluctuation 20% either way), the likeliness of liquidation is very high. Now if I had just bought and held $47 worth of ETH, ETH could dip 30% and I would still maintain the value of holding a certain amount of ETH. 

PrimeXBT offers 100x leverage on cryptocurrency. In this example, you can see I have 1 ETH on 100x Leverage. The total immediate on my margin is $47.19.

Kucoin, FTX and Binance all offer leverage trading. 

$350 Welcome Bonus on PrimeXBT

Trade  up to 100X leverage. New sign-ups get $350 bonus with $800 deoposits in 30-days. 

Visit PrimeXBT

Which one do you recommend?

To start with, you can try Kucoin, FTX or PrimeXBT. In regards to myself, I started with PrimeXBT and found it to be most simple to use. Kucoin’s pro futures UI kind of left me perplexed a bit. On top of that, the bonus I got with PrimeXBT was $350 for depositing $800 in USDC. With Kucoin I was given about $6 in free trade money. On both occasions the money can only be used towards a trade and cannot be transferred out. It never hurts to have options as just like certain exchanges only carry a set amount of coins that others don’t, leverage trading platforms offer a variety of attractive offers to get started. A particular one of PrimeXBT is being able to copy successful trades of others.