Practicing Sound Money Management And Risk Management
Here well recommend a combination of fixed fractional money management on your entire net-worth and investing a fixed percentage of your fractional capital in a single trade.
Now, how does this work?
Ok, lets assume you have a total of 10,000USDT to invest in the cryptocurrency market. Following the fixed fractional money management approach, you can allocate 20% of the 10,000USDT for Bitcoin margin trading.
Doing this protects your account from a total wipe-out in case of massive price swings known as flash crashes that can be over 50% in some cases.
After putting aside the 2000USDT for margin trading, the next step is to risk only 5% of the 2000USDT on every trade as youll be applying leverage of about 50X and taking not more than one transaction per signal.
Lets simplify the process:
10,000USDT -> 2000USDT -> 200USDT -> 100USDT
So with a 100USDT and a 5X leverage, you get to trade 500USDT on the 1Min time frame as recommended earlier.
Still following capital allocation in our example, it is best if you did not risk more than 100USDT per signal generated targeting a 1% move in the Bitcoin price, and stop trading for the day if you lose two trades in a single day.
Finally, Go For A Free Account In SecondsOn BTCC And Try Your First Bitcoin Leverage Trading. The Investment Threshold Is As Low As 0.5 USDT.
Best Crypto Margin Exchanges In 2022
Based on our reviews, these are the best places to trade crypto with leverage:
Led by CEO Sam Bankman-Fried, the team behind FTX has built a professional derivatives and leveraged products exchange that is designed for professional trading firms, intermediate traders and beginners alike. Ranked 3rd in the world based on margin trading volumes that exceed 21 Billion every 24 hours, FTX is our best-rated crypto exchange for margin traders in several countries outside the USA including India, UK, Australia and Singapore.
FTX is known for creating the worlds first cryptocurrency index futures that allow its users to capitalize on the rise or fall of a particular index in the form of a futures contract. Index futures can be traded directly from within the FTX exchange platform.
FTX is well regarded for being innovative with its features, markets and listing of new coins to trade. The current range of margin trading products offered on FTX include:
FTX has been designed for beginners and professional cryptocurrency traders on the platform by offering a simple, easy to navigate and intuitive user interface. The user interface is outstanding when it comes to browsing trading pairs, entering positions, managing trades and reviewing trade history.
Overall, taking into account the features, supported markets, fees and mobile app, FTX is our best-rated margin trading platform for non-USA residents.
Crypto Margin Trading Laws And Regulations In The Usa
The biggest question we see among US traders is âis crypto trading illegal in the USA?â and the answer to that is not at all clear yet. Why is there no direct answer to this simple question for US traders? Let me explain. If the exchange is not properly regulated it is illegal to promote derivatives products, and this is why it is so difficult to find an honest platform that offers margin trading for cryptocurrencies. To be able to offer leveraged derivatives products in the United States you first need to be regulated as a Money Service Business by the Financial Crimes Enforcement Network .
When filing for an MSB approval certain things must be in check to receive the license, for example, the platform needs to have a know your customer system that tags all customers and their identities. The exchange has to comply with anti-money laundering and combat the financing of terrorism acts. There are several regulatory bodies in the United States, for example, the Securities and Exchange Commission which regards cryptocurrencies such as bitcoin as a security, and the Commodities and Futures Trading Commission sees digital assets as commodities.
This creates some barriers that are yet to be taken down before we can see a clear regulatory landscape in the country. Until the regulatory bodies have agreed on how to regulate digital assets, US traders will stay in the gray zone with only a few platforms to turn to when it comes to trading cryptocurrencies on margin.
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How To Use Margin Trading On Binance
3. Youll also need to transfer funds to your Margin Wallet. Click below the candlestick chart.
4. Select the wallet to transfer funds, the destination margin account, and the coin to transfer. Enter the amount and click . In this example, were transferring 100 USDT to the Cross Margin account.
7. You can buy BNB with leverage by entering the amount of USDT by , or the amount of BNB to buy by . You may also drag the bar below to select the percentage of available balance to use. Youll then see the amount youre borrowing for this trade. Click to open the position.
Cryptocurrency Risks With Leverage
Investors are not extremely regular players in terms of cryptocurrency. You will see how to trade cryptocurrency with leverage as the valuation declines from the overpriced to an underpriced stage. There can be no dispute in claiming that several long-term traders have been burnt given the long bearish period of Bitcoin, while by marking holdings, many days players took control made huge money.
It is worth remembering that only those experienced traders, which are confined to leveraged transactions, decided to go away with the money. Rather than imagining huge returns, they are much more concerned with protecting relatively close risks. To succeed in this role, they realized how, if their forecast goes wrong, Cryptocurrency uncertainty could put a crimp on their collateral and so they financed less and worked by setting fixed prices only for good profits.
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How To Leverage Trade Crypto
With regards to margin trading crypto, investors are able to contribute a percentage of the total order value. This is where leverage comes into play, as the increased buying power that it generates can allow a trader to gain access to larger sums of capital.
For example, if a broker offers a leverage rate of 1:100 for trading bitcoin, it means that for every $1 worth of bitcoin in their trading account balance, traders are able to control another $100 worth of the digital currency.
So, in this case, while leverage trading bitcoin allows a trader to take on much larger exposure, it also has the potential to magnify future profits, as outlined below.
If an investor deposits $1,000 worth of bitcoin to open a $100,000 position , and the position subsequently moves into a 1% profit, there will be a gain of $1,000 or 100%. Conversely, without leverage, the gain on the same 100,000 investment amount would total just 1%.
How Does Crypto Leverage Trading Work
Leveraged trading is all about amplifying your potential gains by borrowing additional funds to increase the size of your position. In some platforms like Bybit, you will only need to choose the leverage you want to use for your position and place the order.
Supposing you have $1,000 worth of BTC in your Bybit wallet but want to amplify your potential profits. In this case, you can choose to leverage your crypto up to 100x, but 5x or 10x is optimal for most traders as it also reduces the risk.
If you invest the $1,000 in Bybit with leverage of 10x, the size of your full positions will be $10,000. Therefore, any earnings you make from the trade will be a percentage of the $10,000 full position and not $1,000.
When leverage trading on Binance, you have to open a margin trading account and use the assets you have to borrow additional funds to increase the size of your position. For example, if you have 1 BTC in your wallet, you can transfer it to the margin trading account and use it as collateral to borrow 4 more BTC at their 5:1 fixed rate.
From this example, you can then open a position with 5 BTC, despite your actual investment being 1 BTC. Any gains you get will be a percentage of 5 BTC and not 1 BTC. However, you will need to repay the 4 BTC plus the interest they accrue later, which reduces your profit a little.
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Conlcusion: Should You Trade Digital Assets On Margin
This guide is a helpful tool for anyone looking to start investing in bitcoin or other altcoins with leverage. You will learn the most important aspects such as what margin trading is, how to calculate profits, losses, and maximum position size, laws on cryptocurrency leverage trading in the US, the best margin crypto exchanges in the USA, different levels of leverage, fees while trading with leverage, and all the common risks.
If you are looking for a way to scale up your trading and are aware of all the risks associated with cryptocurrency margin trading you should give it a try. Inexperienced traders should start small to learn how it truly works before you add to the size of your positions. Investing with crypto and leverage can increase profits and losses, therefore I recommend you always use a stop loss to protect your downside. If you plan on trading bitcoin but donât own any BTC yet, consider our guide on the cheapest ways to get bitcoin before starting. Good luck!
Crypto Leverage In Trading All You Need To Know
It is the trading phenomenon of modern times, with traders flocking to cryptocurrency as a form of investment in recent years but how can market movers make the most out of investing in digital currencies?
One potential option is exploring the concept of crypto leverage in trading, which could offer investors the chance to maximise profits and boost trading performance by increasing their overall purchasing power in the market.
Find out all the key details about how to leverage trade crypto, including what it is, how it works, and ways to guard against the risks involved with leverage trading bitcoin in this handy guide. Read on to discover more.
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How Leverage Trading Works
The way leverage trading works is that a trader will make an initial deposit to borrow funds. For instance, if you wanted to invest $5,000 in a leveraged trade at a ratio of 1-to-10, you would only need to invest $500 to open the position. However, traders must keep enough funds in their accounts as collateral for the lending platform.
An open position comes in 2 forms, long or short. Traders will open long positions if they believe the digital assets will increase in price a short position is the opposite. When you trade a short, you borrow Bitcoin instead of cash. So if the price goes down, you buy the same BTC at the lower price and return the lenders Bitcoin and keep the profits.
If your long position trade is successful, the lender will release your initial cash deposit and your earnings. In the event you lose the trade, the broker will liquidate your position and keep your money. You can lower your risk of liquidation by using lower leverage. Many platforms will offer you the chance to use 100-to-1 leverage, but its not always the wise thing to do.
Master A One Kick Trick
Having a plan before executing a margin trade is very important and mastering one effective strategy that can produce consistent results can serve you better than just knowing hundred strategies. You dont need anything intellectual, out of this world technique to make you money, just one simple tactic that worked for you before and which you are comfortable with is more than enough. Find your sweet spot in the market, choose your favorite cryptocurrency and stick to your plan. If you dont have a plan then you shouldnt be on the battlefield. Traders who tend to execute random orders without a plan usually lose their money especially with respect to margin trading.
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Benefits Of Leverage Trading
Here are some advantages why you should learn how to trade cryptocurrency.
- To earn the same benefit as in a traditional trade with any transaction, you have to cut loose a fraction of the cost of your exchange.
- Using leverage, you can allocate money to other assets and make them free. The opportunity to boost the sum left to invest is referred to as gear.
- Using securitized funds to trade on market trends helps you to profit from dropping stocks, as well as rising ones.
How Does Bitcoin Margin Trading Work
- Once you’ve activated your margin trading account and logged in, you’ll need to deposit some funds
- Next up, you can apply for a loan in BTC using your deposited funds as collateral
- You will be charged an interest every day, which updates frequently depending on the exchange
It must be noted that the exchange, on its own, does not pose a lot of risks since every position has its liquidation price, which is based on the level of leverage.
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Can I Adjust My Leverage
Maximum Account Leverage can be adjusted from the derivatives trading page by using the selection bar below the Buy/Long and Sell/Short instruction box
The Maximum Account Leverage is adjustable as long as your account has enough
balance to meet the new margin requirement. The margin for open orders and open
positions will be updated to reflect the new margin requirements.
In Master Account, the maximum leverage allowed is 20x when there are sub-
account with derivative trading enabled.
The final leverage applied to the position will be the lower of the maximum account leverage and the instrument leverage:
Final Position Leverage = min
*Instrument Leverage is determined by the instruments exposure. The larger the instruments exposure, the lower leverage permitted as outlined in the earlier section of this FAQ.
Overall account exposure limit will be removed if a user selects maximum account leverage of 20x or below:
Maximum Account Leverage
Best Crypto Leverage Trading Platforms
With hundreds of leverage trading platforms out there, it can be daunting to select the exchange for you. Ill briefly cover a few exchanges I think are excellent and highlight some key differences between the two.
Our first pick for leverage trading is Binancefor two reasons
Another great exchange for leverage trading is FTX. As one of the newer exchanges on the block, they have quickly risen to become a major player.
In the Asian demographic, OKX is dominant. The second largest exchange globally by volume has fees comparable to Binance. If you are trading in the Asian session , this might be the place for you.
If you prefer to trade on your mobile phone, ByBit is the way to go. Fees are steeper than most other platforms, but the convenience of a smooth mobile application may be worth your while.
Finally, an exchange to watch is Delta Exchange. I have personally used Delta over the past year and have seen the experience improve tremendously. While I dont think theyre at the level of Binance or FTX just yet. However, if the improvements continue, there is nothing holding them back from getting there.
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Selecting Right Trading Platform
Picking the right Bitcoin leverage trading platform can be challenging because there are so many cryptocurrency exchanges offering leveraged trading these days. Trading on a crypto derivatives exchange with the maximum leverage isn’t always the top pick.
When considering a crypto exchange for margin trading, there are several key attributes to remember. One important aspect to consider when looking for the best crypto trading exchange is the trading fees provided by leveraged trading.
All About Crypto Lending Margin Trading And Leverage Trading
Often, investors want to trade crypto assets, but they lack sufficient capital to make a significant return. The highly volatile nature of crypto industry also demands extra capital in case of price drops, so that there is a room for recovery. . Crypto Exchanges and Decentralised Finance platforms offer numerous opportunities for investors to skip the unnecessary documentation, processing fees and the need for large collaterals One of them being crypto lending.
What is Crypto Lending?
Crypto investors can borrow crypto from crypto lenders, who in turn will earn passive income from their investments through the option of lending. The risk for such a transaction is minimal. This is because there is a smart contract, smaller collateral and, in some cases, there is a third party managing the loan.
When is Crypto Lending used?
Crypto Lending is especially used when one needs easy access to capital. It is extremely simple to get a crypto loan against collateral, without the hassle of traditional financing options. Operating without a credit check, crypto lending can be used by anyone who can offer small collateral. For those without collateral to offer, flash loans are also an option wherein the loan is taken only for the duration of a single transaction and settled immediately.
To stabilise investments in a volatile market.
What then is crypto leverage trading or crypto margin trading?
How to manage the risks with crypto leverage trading?
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Why Trade With Leverage
Leverage allows you to control much larger positions than your account deposits.
For example, a 1:100 leverage means that for every $1 in your trading account, you can control $100.
So if you have $1,000 in your account, you can potentially buy or sell $100,000 worth of any tradable instruments. The broker hypothetically lends you the rest of the money. Without leverage, you have to raise the whole $100,000.
Leverage magnifies your potential profits.
Here is an example. A deposit of $1000 enables you to open a $100,000 position . If your position makes 1% profit, you gain $1000 or a massive 100%. Without leverage, a 10% gain on your $1000 investment equates to $10.