What is leverage? The principle of operation of the leverage.
Leverage is a powerful tool that takes advantage of relatively small price movements, “equipping” traders’ portfolios, thereby generating larger position sizes and to increase their capital. faster. Therefore, leverage is a very popular way for BTC investors to buy and sell BTC.
Leverage works using a deposit, also known as “margin”. This money is for syndication, giving you greater visibility on the exchange. You are essentially reducing a portion of your trade, and the exchange with this feature will give you the rest.
The exchange’s products give traders exposure to major cryptocurrencies. Such as Bitcoin and Ethereum. Or other currencies without much capital.
The leverage that gives you exposure to the market you are trading is much larger than the amount you deposit to open the trade.
How does leverage work on the Primexbt trading platform?
Leverage is a key feature of the PrimeXBT trading platform and can be a powerful tool for a trader. You can use it to take advantage of relatively small price movements, “equip” your portfolio for larger position sizes, and to grow your capital faster.
Leverage works by using a deposit, called margin, to give you greater visibility. You are essentially placing a small portion of your entire trade’s value – and PrimeXBT will give you the rest. Our products give traders exposure to major cryptocurrencies, such as Bitcoin and Ethereum and others, without much capital.
PrimeXBT is an award-winning, advanced margin trading platform offering a wide range of Bitcoin-based CFDs with additional leverage and both long and short positions on stock indices, commodities, forex and currencies electronic.
Our products give traders access to a wide range of trading instruments and build a diversified trading portfolio with little capital.
BTC/USD trading example
For example, you want to buy 10 Bitcoins for $10,000.
To open such a trade with a traditional exchange, you will have to pay 10 x $10,000 for a $100,000 position (ignoring any commissions or other fees). If the price of Bitcoin increases by 5%, then your 10 Bitcoins are now worth $10,500 each.
If you chose to sell, then you made a $5,000 profit on your initial $100,000 investment.
Trade leverage 1:100 with PrimeXBT
Here, you only have to pay 1% of your $100,000 or $1,000 to open such a trade. If the Bitcoin price increases by 5%, you will still make the same profit of $5,000, but at a significantly reduced cost.
That means profits can be greatly multiplied.
Why use leverage in cryptocurrency trading?
This is a question asked by many investors. And why is the use of leverage in cryptocurrency trading so popular?
In fact, the leverage in the futures contract will allow the trader to control his or her funds many times larger than the amount currently in his account.
This is completely legal and a great way for many people to make the most of their capital.
Advantages and disadvantages
Leverage trading advantages:
Strong access to capital. Instead of paying in full for a trade, traders only need to pay a fraction of the transaction. The remaining capital will be released to invest in another order called opportunistic acceleration.
Low cost, some trading products will be relatively cheap, which means almost any trader can trade them easily. Instead of investing large amounts of money to enter their markets, one can leverage and take advantage of the price fluctuations of such reputable instruments.
Short selling the market. Using leveraged products to speculate on market movements allows you to benefit from falling markets, as well as rising ones – this is known as short selling.
You only have to put a small part of your trade value to get the same profit as in normal trading with any other exchange.
Disadvantages of leveraged trading:
Loss amplification: The use of leverage if the order fails, it means that the order goes against the direction of your margin, the losses will be magnified. Therefore, capital management is extremely necessary.
Traders can trade over 100 markets on Primexbt trading
- Cryptocurrencies: the coins with the highest liquidity value BTC,ETH,XRP,LTC,…
- Stock indices: Major market indices such as US30, S&P500,NAS100..etc..
- Forex: More than 60 popular forex pairs like EURUSD, GBPUSD, AUDUSD
- Commodities: Precious metals such as Gold, Silver, Platinum, WTI Oil, Brent Oil
If you are a person with a solid knowledge of leverage, this is a method to help you make quick profits when your capital is small. The volatility of the market will greatly increase the chances of making a profit. So, with the above knowledge, hopefully you have a better understanding of leverage and how to use leverage when buying and selling Bitcoin.