Crypto exchanges extend a number of offerings to attract and retain traders and investors. There are loyalty rewards, staking rewards, and so on. And, when it comes to highly ambitious traders, crypto exchanges impress them with leverage trading opportunities. With leverage trading, a crypto trading platform with leverage allows traders to borrow funds from the platform so that they can open trades in large positions- even when they can’t invest a large amount from their own share. The range of leverage varies to accommodate traders of all budgets from 1x to 2x to 10x to even 100x- you have various options to choose from as per your specific trading goals. Read more at multibank.io.
So, how does leverage trading work with a crypto trading platform with leverage?
The post below will discuss that in detail followed by a brief on choosing the right crypto trading platform with leverage.
Leverage trading with crypto exchange
A crypto trading platform with leverage allows leverage trading to make crypto trading more lucrative and flexible for traders.
As leverage trading allows traders to open large trading positions, they can aim for bigger profits. This is what makes the trade more lucrative for traders. On the other hand, thanks to a crypto trading platform with leverage, traders won’t even need to pull in a vast sum of capital all by themselves. Rather, they can only put what they can afford and the rest will be taken care of by the crypto trading platform with leverage. This amazing advantage adds an element of flexibility to leverage trading. Click here to know more about crypto leverage trading.
Margin in leverage trading
It should be noted here that leverage trading involves a term called “margin”. It’s the collateral that you will have to submit to the crypto trading platform with leverage to borrow funds from the exchange. There are two kinds of margin in crypto leverage trading. One is the margin that you will have to deposit while you open your leverage trading account with a crypto trading platform with leverage. The other margin is the one that you will have to maintain to keep the trading position active.
If you ever encounter a loss, it’s likely that your maintenance margin might get liquidated, putting your trading position at the risk of getting closed-out. In that case, your chosen crypto trading platform with leverage will send a margin call. This is sort of a warning or reminder call for the immediate need to refill the margin amount.
Choosing the right platform for crypto leverage trading
There is no dearth of crypto trading platforms with leverage but not all would be equally compatible for you. Leverage trading is extremely risky trading and your success in the trade would be largely determined by your selection of a crypto trading platform with leverage. Here are the pointers that you should remember while looking for the crypto exchange for leverage trading goals.
Does it allow multiple assets for collateral?
Some of the crypto exchanges will demand BTC if you want to trade with BTC. In other words, the asset that you choose for trading should be the same as the crypto that you deposit for collateral in the crypto trading platform with leverage. Now, that’s extremely restrictive, especially for budget traders as it limits their ability to participate in high-roller trades like leverage trading.
What if you want to open a large trading position for BTC but you don’t have enough BTC to find the margin for the trade? On the other hand, you might have more ETH that can fund your collateral adequately. In that case, you have to find a trusted crypto trading platform with leverage that supports the protocol of multi-asset collateral.
Various trading pairs
BTC and ETH are undoubtedly the most popular cryptos for leverage trading. But, what if you want to put money on lesser popular ones? Some of the new altcoins are truly promising and a bunch of visionary traders do prefer to explore them through leverage trading. Do you too prefer to trade on new but futuristic altcoins- say, the underdogs? Well, this is to note here that not all crypto exchanges offer leverage trading on new pairs. So, if you aim to explore leverage trading on unusual pairs, find a crypto trading platform with leverage that encourages new altcoins. Some of the leading altcoins extend over 600 pairs for leverage trading.
This is certainly one of the most crucial factors to check out for while you are looking for a credible crypto trading platform with leverage.
One of the biggest mistakes seen with leverage traders, be it stock or crypto, is overtrading. If they find themselves on a winning spree, they tend to chase every individual green candle that appears before them. In doing that they tend to forget that the market might not be in their favour every single day and might soon switch to bear mode. And that leads to wild losses in leverage trading with crypto trading platforms with leverage.
Not all traders are judicious enough to prevent over trading all by themselves. Sometimes, they need additional support from a crypto trading platform with leverage. Thus, make sure your chosen exchange offers special features to stop overtrading.
Some leading exchanges offer a special mode called “cooling-off mode”. The mode allows traders to suspend trading activities temporarily for a particular timespan. It in turn helps to instill the culture of responsible trading, especially among new traders.
You can also use the cool-off function when you won’t be able to trade for a long-time, say when you are on vacation.
Competitive transaction costs
Sometimes the trading costs are so high that they consume the whole margin amount in your account. If that’s the case, then half of what you will profit from the trade will go to maintain the transaction fees only. Thus, look for a reliable crypto trading platform with leverage that charges competitive transaction charges.
To be on the safer side of leverage trading, always stick to low leverage. It will help to maintain a lower margin that would be easier to refill if you receive a margin call.