How Does Crypto Leverage Trading Work?

Crypto trading involves buying and selling digital coins at different prices and generating income from it. Different trading tools are aimed at helping traders make money on both growing and falling markets. Such a tool as futures derivatives allows investors two options:

Long – suggesting that the asset’s rate will increase and the investor will sell his coins at a higher price.
Short – meaning the market is about to fall, and the investor will buy coins at a lower price.

In addition to futures, traders often use leverage. This tool allows entering the market with a more profitable position using borrowed funds. This financial tool is also connected with the trader’s ability to predict the further market’s movement and gain income from it. It is recommended to use mid-cap coins for these types of trading, for they are more sensitive to market trends. That is, when the market drops, mid-cap coins fall too, and vice versa. For example, take the NEO coin, investigate its price chart and buy this asset to open a long or short position with leverage. In this article, we will answer the questions, what is leverage in crypto trading and how to buy NEO.

How to Leverage Trade Crypto?

Large crypto platforms such as Binance and WhiteBIT offer margin trading. Having a margin account, you can pick a leverage ratio and multiply your initial capital many times (some platforms even offer an X100 ratio). Leverage means that you borrow capital from a crypto trading platform and open a position that can bring you many zeros return. At the same time, you put in only a percentage of the total value of your position. For example, you have only $1000, but you wish to open a position worth $10 000. Pick the leverage ratio X10, so your initial capital multiplies ten times, and as a result, your position is $10 000. So if your trade is successful, you will generate X10 income, having invested only $1000. However, it is important to remember that leveraged trading also works in the reverse direction – if your trade is not successful and the market moves in a totally different direction, you lose funds, and your position is liquidated. So leveraged trading is a tool for experienced investors.