Crypto Trading with Leverage and Margin

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Crypto Trading with Leverage and Margin

Cryptocurrency trading platforms offer many different financial instruments that allow traders to generate income from crypto. There are simple exchange options, spot market, and p2p, as well as advanced trading tools such as futures trading and margin. Many investors have heard about margin trading, so we would like to talk about it in more detail in this article. 

Before we turn to our main topic, we want to mention the importance of picking a crypto asset for trading. While the market leaders have high prices (BTC, ETH), and not all traders may afford to buy them, cheaper crypto coins are also worth attention. For example, NEO tokens. The project has become incredibly popular in China and aims to develop its adoption in European countries. The essence of the NEO crypto is in the tokenization of real-sector assets, opening all the advantages of crypto scope. Assets tokenisation is the future, so NEO will likely become a reasonably popular platform. To find out the current NEO coin price and trade this asset, you may use the WhiteBIT exchange. The platform also offers advanced trading tools, such as cryptocurrency trading with leverage, so let’s discuss this option now.

What is Margin and Cryptocurrency Trading Leverage?

In simple terms, a margin is a financial instrument that implies using borrowed funds to open a more profitable position in the market. Margin involves cryptocurrency trading leverage, which allows a trader to gain access to much larger amounts of capital and, thus, receive much higher returns. At the same time, another side of the coin is that using borrowed funds to open a better trading position bears higher risks of losing all funds.

How Does It Work?

If you have just a small initial capital but wish, for example, to enter the market with $10 000, you may use the leverage ratio 1:10, and the margin will be 10%, so the sum you need to invest is only $1000. Without using the leverage, you would have to invest the whole amount of $10 000. In other words, using cryptocurrency trading leverage, the needed initial investment is much less, but the profit is still huge as if your capital was really $10 000. It works if the market really moves you suppose it to move. If it goes in the reverse order, you bear losses, and your position can be liquidated.

Advantages:

  • Entering the market with a much more profitable position and the possibility to make a fortune.
  • Trading with limited initial capital
  • Managing risks (by picking a lower or bigger leverage ratio).

Disadvantages:

  • Increased risks
  • Greater losses
  • If the market changes the trend, you lose capital instantly.

If you want to practice using different leverage ratios, welcome to the WhiteBIT demo trading account.

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