Cryptocurrencies have made it possible to jump-start your investment portfolio with increased profits. With the help of leverage trading with Phemex, you can increase your profitability by depositing a small amount of money and using borrowed capital. But this strategy attracts a high level of risk and you should be cautious while using this strategy.
This guide is created considering the fact that not all investors are aware of how the leverage trading process works in the crypto world. In this guide, I will tell you things to consider before buying digital assets, including the risks of leverage trading along with the list of top exchanges offering leverage trading to their users.
What is Leverage Trading?
In the world of crypto, leverage trading is widely used to maximize returns. Traders enable users to use leverage to make profits very quickly. However, an inexperienced trader may be misled into thinking that this investment tool allows him/her to liquidate a ‘leveraged’ cryptocurrency trading position faster than otherwise.
Let me explain what this means and why it’s not true at all.
In the crypto world, leverage trading refers to a tool that allows investors to perform spot trades (buy and sell) using borrowed funds from brokers. Typically, these funds exceed the investors’ account balance.
It’s a terrific technique to increase purchasing power and maximize profits, and the greatest thing is that the investor may start trading with a reasonable amount of money.
Because cryptocurrencies are such a volatile market, even the tiniest amount of leverage should be avoided at all costs. That is why the purpose of why I am sharing this with you is to help you understand the complexities of leverage trading.
How Does it Work?
When trading cryptocurrencies on leverage, you must first deposit collateral equal to a percentage of the overall position size. Depending on the trading platform, this sum is frequently deposited in the traded asset (in-kind), however, it can alternatively be paid in stablecoins or cash.
In this video, I’ll explain how exactly Leverage trading works using Phemex.
Do You Have to Use Leverage?
If you have sufficient capital to reach your trading goals without having to use leverage, there is no need for leverage if you don’t want to use it. If you just don’t really want to deal with the risk of leverage, like the added risk and complications of trading on leverage, you do not have to use leverage.
Also if you live in an area where leveraged trading is restricted, you can still absolutely day trade crypto, just don’t use leverage.
So one of the ways that you can do this is you can just call trade and trade against a stable coin such as USDT, you can still use a leveraged trading platform, but you can just set your leverage really, really low like 1x. That way you can sell short.
All of that to say, you absolutely do not have to use leverage if you don’t want to. If you have $100,000, then you can still go for 0.4% per trade maybe and you could still hit 1.2% per day. And that would be an excellent income for the year.
Because these things come down to percentages, at the end of the day, it depends on what your income goal is and how much you are expecting slash wanting to make.
So if you have sufficient capital to not have to trade on leverage and still make your desired income goal, which for me, I’m thinking that if you can get more than 1% per day, that’s a really excellent return if you’re not using leverage.
So with absolutely no leverage, you could probably expect to make about 1% per day on your capital. Of course, once you get the hang of trading and once you put in the necessary work and practice, it’s the same the learning curve is exactly the same as trading on leverage.
Besides like the technical learning curve of learning to manage your leverage, everything else is the same, so you still have to practice. You still have to practice entering practice exiting, practice your risk management, and you still have to implement risk management, even if you’re not trading on leverage.
Because otherwise you’re likely to get stuck in trades for days, weeks, or months, and then it’s not really day trading anymore and you can’t rely on that daily income.
But all of that to say that professional day traders in the stock market typically aim to make about one to 2% per day. So that’s an extremely reasonable rate of return and if you have sufficient capital to make your goal Absolutely. I think that’s a great way to approach it.
My top 2 Recommended Exchanges to Trade on Leverage
Here are my top 2 recommended Exchanges to trade crypto on Leverage:
If you want to day trade on leverage, you have to have a platform that allows leverage trading. And whether you decide to trade on leverage or not, either way, you’re going to need an exchange to day trade crypto.
Phemex was created in 2019. It’s a company based out of Singapore.
In this platform, you can trade perpetual contracts with a leverage of up to 100x. To open a position, you first set aside a specified margin or fraction of your funds. Then you decide how much leverage you want to utilize. Your liquidation price is adjusted based on your degree of leverage.
The smaller the gap between your entrance price and your liquidation price, the more leverage you apply. Leverage allows you to make large profits at a little cost, but it also makes you more likely to have your holdings liquidated if the market moves in the wrong direction.
I would say it’s as safe as any other crypto exchange. If you’ve been in crypto for a while, you know that exchanges can get hacked, and you know that they can go under like BitSeven disappeared over the course of the day saying that they had to do some technical fixes and then they just never came back.
So, is Phemex 100% safe? No. But no crypto exchanges. I would say it’s relatively safe. But I would say don’t keep money on there unless you’re specifically using it for trading.
Bybit is a cryptocurrency exchange that launched in March 2018 with the goal of providing a professional platform with an ultra-fast matching engine, outstanding customer service, and multilingual community support for crypto traders.
Retail and institutional clients around the world use the company’s innovative online spot and derivatives trading services, mining and staking products, and API support, and it aims to be the most reliable exchange for the emerging digital asset class.
You can trade Bitcoin on the Bybit exchange with a leverage of up to 100x. Consider leverage trading to be the ability to open a trade worth more than the initial margin you’re risking. When it comes to leverage trading with Bybit, it’s important to understand that there are both enormous profits and big risks.
My Final Thoughts
It’s a good idea to start with a simulator account to gain experience with technical analysis and market movements. Gaining experience in estimating how much a trade movement works, as well as playing with leverage, will improve your chances of trading success.
Knowing when and when not to utilize leverage is one of the secrets to becoming a master of leverage trading. Although leverage has long been a popular financial asset, knowing when and how to use it might help you save money. Assume you gradually improve your understanding of risk-management tactics and trading methodologies.
In that situation, you should learn how to successfully use leveraged trading.
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