As the CeFi cryptocurrency industry is developing rapidly, many people become interested in buying crypto for trading or long term investment. Numerous platforms offer tools for convenient and profitable cryptocurrency trading. The most popular are:
- Binance
- Coinbase
- OKEx
- WhiteBIT
They offer not only buying and selling cryptocurrency options but also many other instruments such as cryptocurrency exchange, margin trading, using algorithms and bots, spot trading, p2p, etc. In this article, we will take a closer look at trading with leverage.
If you do not have enough money for buying and selling cryptocurrency, you may take advantage of margin trading. It implies using borrowed money for trading orders while having small initial capital as collateral.
Buying crypto with Leverage
Every exchange allows borrowing a different amount; on average, it is 100 times more than you own. The leverage can be 5, 10, or even 20 times more than you have. Suppose, you have $200, and you open the deal on $2000 in BTC.
To begin with, you should put funds in your account. This is called “collateral”. The bigger leverage you want, the larger amount of collateral required. The position with leverage is called “margin”.
Let’s say, you need $100 collateral if you want to open the deal on $1000 in ETH and use 10x leverage.
There is a concept of “maintenance margin”. If you place the order and the market changes against you, you will have to replenish your account once again. This will help you avoid liquidation of your position.
It is essential to remember that using leverage bears risks, for asset rates may change probably every minute. Even a small market fluctuation can lead to your position liquidation. It is the reason why margin trading is rather complicated and too risky for beginners.
It is recommended to start with small leverage, for example, 2x. Don’t forget to assess your risks and don’t rush.
It is important to use only reliable platforms for trading. On the WhiteBIT platform, you can try leverage trading on a demo regime. A demo account implies conducting operations with internal assets that cannot be cashed out or deposited. You just use them for practicing. That’s a good idea to ensure you learn all the trading mechanisms and get prepared to trade in real.