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What is Leverage Trading?

27.05.2021

Crypto trading involves many strategies. Leverage trading is a trading strategy that can increase your profits significantly without having to put down a huge initial capital – if followed wisely.

In this article, we’ll take a closer look at leverage trading and how it works.

Leveraged Trading: What is it?

Leverage trading, also known as margin trading, leveraged trading, trading on margin/leverage, etc., refers to taking on debt and using borrowed capital to potentially make a much higher return on the initial investment. This particular strategy allows traders to open positions larger than what the initial capital would otherwise allow.

Our guide to leverage trading is a great place to start your leverage-related crypto education.

How Does it Work?

In simple terms, leverage trading is about borrowing funds to buy crypto assets for trading from the exchange itself. Differently from margin, leverage is always expressed as a ratio. Exchanges offer a wide range of leverage – anything from 2:1 to as high as 100:1.

Here’s an example of a 5:1 leverage, also offered on the CoinMetro platform. If a trader wishes to make a $5,000 trade with a 5x leverage – i.e., 5:1 – they will need to put down at least 20% initial capital, or $1,000.

What are the Dangers ?

There are a number of reasons why this strategy is recommended for more seasoned crypto traders. However, we’ll focus on the main risk involved.

When it comes to regular crypto trading, if you decide to sell your assets, you’ll always get something back, even if you sell at a disappointing loss. In other words, it’s certain that you get some money back no matter what.

With leverage trading, there is a danger of getting liquidated and losing your entire account. Ouch.

We understand that the temptation to maximize your profits is irresistible, but leverage trading only works if you know what you’re doing – otherwise, you may lose everything in a blink of an eye. Those who win regularly have years of experience they rely on when engaging in this type of trading.

If you’re looking to try out different strategies, there’s no harm in testing out leverage trading.

We advise you to start out slow and small, investing very little. Before you start trading, do your research and educate yourself on the subject to understand the dos and donts. Equally important, don’t neglect stop losses and make sure to keep the leverage very low. The most important advice of all – never use the money you can’t afford to lose, no matter how tempting the opportunity!

Trading on Leverage on CoinMetro

Crypto leverage trading is available on most major exchanges, including CoinMetro. But one thing is sure – most crypto exchanges are far behind the only and only CoinMetro.

We do so many things differently. CoinMetro innovates and educates. We personalize your crypto journey and move the crypto industry forward. The CoinMetro team is trying to revolutionize the scene by making it accessible and fully regulated.

We offer you a platform for leveraged trading with advanced options and features. You can have a quick look at the demo version.

To access the full range of the CoinMetro solutions and features, sign up for an account and complete your registration.