What is Leverage Crypto Trading and How Does It work?

Cryptocurrency trading implies opening positions on buying and selling crypto assets with the goat to generate income from changing prices. It often happens that a trader wants to buy cryptocurrencies but does not have enough money for them. In this case, leveraged trading comes to help.

Leverage is borrowed funds the trader uses to open better positions and thus multiply his returns in the result. Suppose you want to buy $10 000 worth of Bitcoin, but you have only $1000. In this situation, you can borrow funds and buy $10 000 worth of Bitcoin while, in fact, you pay only 1000. For that purpose, you need to take leverage of 10X.

Every crypto exchange offers a different size of leverage.

How to Buy Crypto Using Borrowed Funds?

The sum you initially have ($1000 in our case) serves as collateral in the trade. So you put this sim as the margin for your leverage trade. The rest of the sum ($10 000) will be taken from a crypto exchange). If the price changes on the side favorable to you, you receive multiplied income from the use of leverage. Still, if it moves in the reverse side, you need to add money to your collateral, or you will bear huge losses, and your position will be liquidated, of course, the initial amount will be lost as well. The more you borrow, the bigger the risks you take, so be careful and evaluate risks and benefits before borrowing because it may happen that you will have to return more funds than you took.

High risks make leveraged trading not a good idea for beginners who make the following mistakes:

• Take big leverage from the first try
• Do not withdraw but try to recover losses and raise their positions, which brings to even more considerable losses.

Where to Gain Experience?

WhiteBIT is the best crypto exchange for leverage. It offers up to 20X borrowed finds and allows users to experiment using demo tokens. Demo trading helps “feel” risks and evaluate your skills for taking a higher risk. A good practice with demo tokens will teach you to react to market fluctuations and unexpected price jumps. WhiteBIT offers a demo trading feature that allows users to practice trading with a simulated trading account without risking real funds. It can be an advantage for traders of all levels, as it enables them to test out different trading strategies and get a feel for the platform’s features and functionality without risking any actual capital. Demo trading can also be a useful tool for new traders who are still learning the basics of cryptocurrency trading, as it allows them to gain experience and confidence before moving on to real trades. Additionally, the WhiteBIT demo trading feature is easy to use and offers a realistic trading experience with live market data and customizable trading settings. So the demo trading feature is a valuable tool for traders looking to improve their skills and confidence on the WhiteBIT platform.