Top 15 Crypto Leverage Trading Strategies
Bitcoin and crypto leverage trading strategies are the foundation and the most important tool for any trader thinking to leverage up for bigger gains. If you have been involved in the crypto markets for a while you know how volatile things can get and when you add leveraged trading to the equation, you need to be fully prepared.
Most traders that make big money with leverage trading crypto have a handful of strategies that they use in different scenarios. It all depends on how the market behaves and which coin you are currently trading. Are you going long or are you going short? Is the volatility low or high?
All of this matters and the better prepared you are to tackle the markets the more money you stand to gain. This goes for both the risk management and the selection of trades that you make.
In this guide, I will break down my top 15 choices of cryptocurrency leverage trading strategies that you can adopt today. Make sure that you read through the entire guide as I think strategy number 14 will surprise you. Even though this strategy is difficult to pull off, I have made some of my biggest gains using it.
Strategy number 15 is usually what makes beginner traders start earning money consistently, even with a small account. However, I recommend reading every crypto leverage trading strategy one by one. Some of these leverage trading tips will increase your output immediately if you follow them well.
1. Always use isolated margin
When you open a position worth $100 in margin capital, you can choose to do this with either isolated margin or crossed margin.
Isolated margin is a crypto exchange functionality that lets you isolate and limit the margin capital to every open position.
This means that each leveraged position you open only has access to a certain amount of margin capital, or risk capital, as it is also called.
Why is this important?
This is to limit the potential loss of each position to the margin capital attached to the position when it was opened, in this example, $100.
So, if you have a maximum loss on this position, the maximum amount you can lose is $100.
On the contrary, if you used crossed margin, one single position could liquidate your whole account due to a big loss.
Crossed margin tells your trading platform to use all the margin capital you have in your account as risk capital to support any losing position.
This is bad because, in the event that you forget to add your stop-loss and the market declines heavily, your whole account can suffer a leverage trading liquidation.
So remember, always use isolated margin whenever your cryptocurrency exchange asks you which option you want, this can literally save your entire account.
2. Trade only a couple of coins
How many cryptocurrencies are you currently leveraging?
If the answer is more than just a few you are not doing it the right way and you are not being as effective as you could.
The reason why you should only trade less than a handful of digital currencies at the same time is that it’s going to be very difficult to keep track of what each coin is doing.
You want to be a master of a few instead of half-decent trading 10 or 20 coins.
When you learn one, two, or perhaps three coins, you will start to see patterns and behaviors that you would not detect unless you put in the work to analyze each coin.
When you study the price movement of each cryptocurrency for a long time you start to separate the behavior and you learn which phase the price is trading in.
This is extremely valuable information when using leverage in day trading.
When you master a few coins you:
- Learn more setups
- Trust your setups better
- Trade bigger
- Make fewer mistakes
- Get a sense of control
These are some of the biggest factors that will affect a retail trader when choosing a smaller batch of markets.
Your technical analysis skills will also improve drastically because you learn what works and what doesn’t
If you spend time mastering a few coins you will start finding new opportunities and make more money than you made before just by focusing your energy on a few price charts.
Your payouts are also bigger since you can use one-third of your account in each coin.
When you add 100x leverage to this mix you are on your way to making real money.
3. Never add to losers
Most novice traders add to their losing positions like it was a long-term leverage investing strategy.
This is wrong for so many reasons but the most important one is, that you are wrong!
If you analyze the market and predict a positive breakout or a positive trend for the next couple of minutes or hours you are expecting the market to follow your prediction and move upwards.
If the market however falls just minutes into your trade it shows that your analysis was wrong and it is time to cut the loss.
Instead, many beginners choose to add to the position and hope that the market magically turns around and comes back.
The thing you need to understand with trading is that most things are in the grey area and it’s sometimes difficult to separate theories from what is actually going on.
But when it comes to winning or losing positions, it is dead black, or white as day.
You are either winning, or you are losing, there is nothing in between that is called waiting.
You should make your analysis, make your prediction, calculate your risk, choose your position size (or use our position size calculator crypto), add your stop-loss, and then enter the market.
That is all you can control as a trader, no it’s up to the market to go where it wants to go and there is nothing you can do to change that.
If the market goes in the opposite direction and you are wrong, take the loss and wait for the next trade.
Every trader that gets married to their positions and can’t let them go because of ego or some other emotion will not make it.
To become a real trader you need to admit when you are wrong and take a loss, rather sooner than later.
This will save you money and a lof of stress.
The good thing is that there will always be a new trade, especially if you are day trading leveraged crypto contracts.
4. Breakout trades
Breakout trades should be your bread and butter as a crypto trader, especially if you are using leverage to boost your profits.
I know you have probably heard this before and you might think that it’s something that you should know by now.
The thing is that many beginner traders don’t know how to trade breakouts and they also think it’s a little bit scary to enter the market just as it breaks to the upside or the downside.
The main reason and the number one factor that a breakout setup contributes to any trader is the skewed risk-reward ratio and the immense momentum that enters the market.
A profitable risk-reward ratio in any kind of trading is 1:2, 1:3, or sometimes 1:5.
To find out whether your setup has a good risk reward ratio, use our risk reward ratio calculator. Aim for a ratio of at least 2.
When you look at a breakout situation you can sometimes find opportunities with a 1:20 or even 1:50 risk-reward ratio.
This means that for every time you take this trade, you are expected to make at least 20 times your current risk.
Of course, you are not going to win every trade but that’s the theory.
Now, if you add 20x leverage or even 50x leverage you start to see why breakouts are so highly sought-after.
The fact that these trades don’t occur every day is what makes them so good.
There is always a huge buildup to these trades that usually end in one side of the market getting stopped out and turning the market completely one-sided.
You can imagine what happens with a cryptocurrency that is heavily traded with leverage and suddenly all the buyers are forced to either liquidate their position or at least sell at a large loss.
This creates a cascading effect that throws the market down creating a negative feedback loop that will continue until the short-sellers start to take profits.
Related: How much leverage is required to short sell?
So remember, practice your breakout trading, I know many traders that make a good living only trading one setup.
5. Prepare your stop-loss beforehand
If I could give you one piece of advice on risk management it would be this one.
Always analyze and calculate your stop-loss before you enter the market, it will literally save your trading account.
So why do you need to do this before and why not just go with the flow and see how the market behaves?
This is a question that most newbies ask themselves and then they get caught up in a bad market situation and the only way out is to take a painful loss.
Good traders, those who make money consistently, and avoid giving it back, are the traders you want to learn from.
One thing that separates them from the crowd is the preparation when it comes to both risk management and the setup.
The setup is a more complicated story but the risk management part is pretty simple that any trader can figure out with a little guidance.
Professional traders always calculate the leverage and position size plus the total risk for that position BEFORE they enter.
I want to put the emphasis on the word before because that is the most important part.
You want your exit to be as mechanical as possible and you want to leave your emotions outside of it, that way you can quantify your trading better.
If you know your total risk (loss) per trade and your potential upside combined with a setup that you are familiar with, then you know more or less if you are going to be successful in the long term.
However, this requires you to add the protective stop before you enter, otherwise, you can’t calculate it.
If you enter the market without a stop-loss and then start making things up as you go, you are lost.
Then you can never calculate your expected return rate and you will have nothing to stand on.
Trading is very mathematical and the better you can calculate how much you are expected to win the better you will become and selecting your setups and choosing when to enter.
A trader that adds the stop-loss beforehand also protects his downside even before the trade is executed and will never experience stupid losses that wipe out several weeks of profits in one bad trade.
6. Increase leverage on positive trades
If you want to know how to really push your winnings to the next level then you need to learn this technique.
My biggest winnings have come from trades where I increased my leverage after I had entered and saw that this trade had more potential.
If you think about it, it makes a lot of sense to test the market before you go “all in”.
It is also much easier to increase the size of a position when you are in the green, or when you are trading with profits.
This way you can only close out the position in two ways, a large profit, or break even.
The trick to this strategy is to be patient with your trades and always have the big winner in the back of your head when you are trading.
You should always be on the lookout for the trade that could potentially double or triple your account in one go.
When you find yourself in a good trade that feels a little bit too good, it is always a good time to press a little bit on the gas pedal to see where things are going.
If you are right and you increase your leverage from 1:10 to 1:30 while adding size to the position you have already tripled your profit potential if the trade were to succeed.
The best thing is that you didn’t risk more money than what was already in a profit.
The reason why new traders find it difficult to do this is that they are too eager to get into the market with a huge position.
What ends up happening is that they never succeed to enter the market with a very large position because the stop-loss distance is never correct and it seems too scary to enter with $25.000 when your normal position size is $5000.
The better choice is to trade your normal setups and when you see that the market has more potential than you previously thought, you hit it again.
You will be surprised by how much more money you are going to make from crypto leverage trading with this strategy.
Once you have learned to scout for these opportunities it is all about controlling your stop-loss level and increasing the leverage ratio just the right amount.
Check out our guide on the best leverage for crypto to learn more.
7. Use a take-profit order
This strategy is something that can really help indecisive crypto traders to start earning money.
Far too many novice traders give back their profits due to a bunch of reasons such as greed, laziness, and just inexperience.
In the same way that you calculate your protective stop depending on the structure of the market, you can calculate your take profit order as well.
This will make your crypto leverage trading more mechanical and automatic and you will not have to deal with decision-making while you have an open trade.
It is also great if you don’t have all the time on your hands and can keep staring at the charts until your hit the perfect level.
Take profit orders can lock in profits better than most traders and you should use it if you have trouble with giving away too much money to the market after your levels have been hit.
It usually boils down to greed, another emotion that destroys trading just as much as fear.
First of all, your need to make sure that your take profit order is valid and this is done by measuring your stop-loss level and multiplying it by three.
This will give you a risk-reward ratio of 1:3.
If your SL level is $200 below your entry, then your TP should be $600 above the entry price.
If you can’t make this work, then the setup is not suited for this market, or you need to change your SL to make things work.
Sometimes you just have to wait for another opportunity to make sure that your setup has a positive expectancy.
Never enter a trade that doesn’t have at least a 1:3 risk-reward ratio, this is the minimum calculation for most day traders.
Once you have calculated the SL you can not add your TP level which will automatically get triggered once your cryptocurrency hits the target.
Keep in mind that this will give you more time to trade other markets while your current position works its magic.
8. If there is no action, don’t act
Here is a weird strategy that is extremely valuable to any new trader that is trying to use leverage to make money in the crypto markets.
Most of the time the crypto market is moving up and down in a very wild fashion and it is famously known for its high volatility.
Volatility is something that every day trader needs in order to make money because it is volatility that makes our trades earn a profit at the end of the day.
But what happens when the volatility dries out and the market suddenly stops moving?
Do we keep trading, do we change our setups, or do we increase the size to compensate for the lack of movements?
No, when the market pauses and slows down we should not change our approach or increase our size to try to make up for the lack of volatility.
This is just like kicking a dead horse, it won’t move.
When your favorite crypto coin stops moving and enters a tight trading range you should also stop trading and take a moment to leave the screen.
But why is this? Why can’t we adapt and keep trading even if the market is moving less?
The word is inconsistent. The market is inconsistent and it doesn’t have a clear trend, in any direction.
When this happens it means that you can’t trust the market to do what you think it’s going to do.
It will only end up going back into the range and keep bouncing between the lows and the highs.
Traders who attempt to trade a tight trading range will only spend money on leverage commissions and they will find themselves slowly bleeding their account down from too many stopped-out trades.
Tight trading ranges bring the opposite of breakout trades, there is no momentum, and when there is no momentum we can’t day trade.
That’s it, when you find yourself in a situation where there is no action, don’t act.
9. Check BTC short ratio
Here is a Bitcoin leverage trading strategy that most of you probably don’t know exists, and if you know about it I can guarantee that you are using it wrong.
First of all, the BTC short ratio is a measurement of how many traders are in a leveraged short position on an exchange.
Why does this matter you might think?
It matters a lot because the more traders that are leveraging their crypto short positions the more fuel there is to the upside if there was a short squeeze.
The more fuel there is to the upside the bigger the potential breakout will be.
Are you following me here?
If you take a look at the actual BTC short ratio chart you can see how it swings up and down with a fair amount of regularity.
This happens because the short traders get squeezed out of the market quite frequently and are forced to close out their position with a market buy order.
That is important to know. When a short position gets stopped out or liquidated it becomes a buy order, and just as any other buy order, it will push the market up.
So, what would happen if the short ratios of BTC showed a very high reading and the market was in a tight trading range and ready to break out to the upside?
Well, it would be a fantastic opportunity to look for a bullish breakout in Bitcoin.
It is not guaranteed that the setup would work, of course not, but it will give you a good indication of what could happen.
The way you should go about using this indicator is whenever you see low prices in Bitcoin where a potential bullish breakout setup is forming, check the short ratio to see if there are any squeezed short sellers below the surface.
You will be surprised how often it is the short-sellers that push the market initially only to have the rest of the pack, the buyers, follow suit and push the market further up.
This is a great strategy for day traders who leverage Bitcoin and other altcoins regularly.
10. Never risk more than 1%
If you risk 20% of your account in every trade you can only last 5 losing trades in a row before you are completely wiped out and out of cash.
However, if you risk only 1% per trade, you can last 100 losses in a row before you have to fund your account again.
I have never heard of a trader, not even a bad trader, who doesn’t score a few winners over the course of 100 trades.
As a trader, you should score a winner roughly every fourth or fifth trade, depending on your strategy of course.
Some traders win 50% of the time but that is very very rare.
Now, how are you supposed to trade with size if you can only lose 1% per trade, the position size will be extremely small you might think?
Here is the thing, you should choose your setup carefully and try to make your stop loss as tight as possible.
This way you can afford to have a 1% risk with a huge upside.
The way you control your 1% risk is by measuring the distance to your SL and then adding the right amount of size to the position.
If your SL is very close to your entry price, you can leverage up and increase the size.
The trick here is to only choose the setups that have a very skewed risk-reward ratio where your SL is very close to the entry.
These kinds of setups can usually be found in heavy breakout scenarios where the market gets one-sided pretty fast and you can enter with a super tight SL.
So, when you enter with a 1% risk with a short distance to your SL you can afford to increase the size and still be within the range of only risk a small amount of money per trade.
Some of my most profitable trades have been where my SL was 0.10% away from my entry level in a market that was either rushing up heavily or falling down like a stone.
If you use leverage in CFD trading this is a great way of keeping your balance in good condition.
11. Use the fear and greed index
The fear and greed index is a perfect strategy for leveraged crypto traders because it gives you a general feel of the average market participant.
This index will give you a hint of how the market is feeling at any given moment and you can withdraw valuable information.
The way I use it is whenever the market is heavily pushed to the upside or the downside, I go to check the F&G index to see if the market is experiencing high fear or high greed.
When the market is in either of these states I know that I might find good trading opportunities should the market give me a good setup.
For example, if the market is falling and the index tells me that there is a lot of fear among the traders, I generally look for a time to take a reversal trade.
This is because when the big mass of traders do things at the same time, the market usually exhausts itself and turns around.
The same thing works on the upside.
If the market is showing new highs day after day and the index shows high greed, I know there might be a parabolic move coming to the upside and I might have a chance to pick a good short trade.
As you can see, the index works best in extreme situations and you will not get that much good information when this is just moving along in a normal fashion.
For example, when the market is range-bound and there is not much going on I would not care to look at the index because it will give you a reading in the middle which is not valuable information.
The next time the market falls heavily or spikes up for a couple of days, check the index to see if the market participants are overly greedy or very fearful.
In any way, there might be a good reversal trade around the corner that is worth waiting for.
12. Test the crypto momentum
How do you test the momentum of a coin or the cryptocurrency market in general?
Well, it is easy, but first, you need to establish your setups that are based on momentum.
A couple of these setups should be around breakouts and big reversal trades.
Momentum in cryptocurrency is a powerful force that usually lasts for a couple of hours up to a couple of days and when it happens you should get ready to tag along.
You might find momentum in the weirdest situations and you should always be on the lookout for it.
Now, the way you test the momentum of a coin is to send out a test order.
It is a basic buy or sell order with a very small size that doesn’t really carry any significant risk to your portfolio.
You should of course add an SL to this position as anything can happen in the crypto world.
However, once you have sent out your test order you wait.
You wait to see where and how the position is moving and take note of anything that is out of the usual.
If nothing happens, then you simply stay put and wait a little bit longer.
But, should the market give you a good headstart either on the upside or the downside you know there might be something going on.
This position is not meant to give your a profit, it is only meant to give you a signal.
But can’t you see this without this position, just by looking at the market?
Yes, you can, but it is more effective with a live order because you will see the P&L in your account balance and you will feel the market in a different way.
This is a great strategy when leverage trading different altcoins that you want to try out.
For example, if you have seen something interesting through some technical analysis and you want to know more, send out a test order and see where it goes.
13. Combine several time frames
Combining several time frames when doing a technical analysis is a great way to get confirmation on a trend.
The reason for this is simple.
The more time frames that lineup, the more traders are lining up.
This means that there are more traders looking at the same thing as you are and this means potential momentum in one direction.
If you are a crypto scalper I would recommend checking the 1-minute, 5-minute, 20-minute, and 1-hour charts to see how the market is lining up for the day.
If all of the charts are pointing in the same direction you know you might have a good day ahead of you.
If you are a day trader that holds positions for an hour or more I would recommend checking the 15-minute, 30-minute, 2-hour, and 4-hour charts to see how the bigger picture looks.
Don’t bother checking the daily or weekly because that will only show you the overall market trend and that means nothing for a trader who acts on intraday movements.
You want to see that at least 3 out of 4 charts line up but preferably all of the time frames should be in line.
From here, simply trade as usual.
However, this should give you more confidence to push your good trades.
Once you find yourself in a great trade with a good entry, push the trade with higher volume and more leverage to squeeze the market for profits.
14. Short squeeze when possible
A good short squeeze is one of the most profitable breakout setups that any trader can find.
A short squeeze happens when many traders short-sell a market that is not really negative, it is just experiencing a big pullback.
Think of it as eager traders getting in too early in a trade that is not there.
Most of the time this leveraged crypto trading strategy works best in combination with the BTC short ratio explained further up in the guide.
While using this index you can actually see how many crypto traders have leveraged short positions.
So, how do you do it?
It is very simple, you first need to establish the general trend of the market which should be positive when you check the 1-hour and 4-hour charts.
Then, when the market pulls back on big volume, you want to see that the BTC short ratio increases to a high level.
It doesn’t have to be an all-time high, as long as it reads higher than average.
From here you look for more traders to pile in on the short side while you wait for the market to slow down.
When the market slows down on the downside, you get ready to enter.
You want to enter just as the market moves above the range where all the short sellers entered.
From here it’s all about pushing the trade with a high leverage crypto trading strategy and a tight SL.
Related: What is high leverage trading
Then wait for all the short sellers to unfold their positions and see how the market shoots up like a cannonball.
This could be one of your most profitable setups but you need to be patient enough to wait for the right setup.
15. Use the number 1 leading crypto indicator
A leading indicator in cryptocurrency trading is something that most beginners lack and therefore, they don’t make money.
This is especially true for those who are using leverage to increase the size.
The best leading indicator is by far volume.
If you are not using volume when trading you are missing the big picture.
Volume is the same thing as contracts traded, both in and out.
Volume means fuel and fuel means movement.
You can’t expect to make money as a crypto day trader without consistently predicting where the market will move.
You need to be able to support your ideas with real confirmation.
The volume will tell you if you are right in your analysis, for example, if you believe that the market will move to a new high and push above a range, you need to see volume to believe it.
If there is no volume in the move above the range there is no real follow-through.
Every time I see low volume I think to myself “no setup that I see today without volume is true”.
And I think the opposite when there is a high volume “most setups that I see today on high volume are probably good to take”.
That’s how simple it is but if you are stuck trading without volume you need to change it today.
Find one of the best crypto leverage trading platforms and exchanges that has the volume indicator as an option and sign up today.
What is a crypto leverage trading strategy?
A crypto leverage trading strategy is a way of approaching the markets and thinking about your trading so that you skew the probabilities in your favor.
Some strategies are directly connected to the market and how it moves while others are more focused on how you think.
It requires a good strategy to make money as a leveraged trade and you need to work on several of them to see success.
Without a strategy, you are left to a walk of random events that will most likely end in ruin and stress.
All profitable traders that make real money trading Bitcoin or any other altcoin have a bunch of good strategies that they have internalized over the years.
You need to start implementing your own strategies if you want to go from losing money, to slowly start earning a good living from speculating in the markets.
A strategy is nothing more than a way of seeing your own trading, seeing the markets, and how you approach different situations such as setups or different opportunities.
Why you need a crypto leverage trading strategy
If you have ever been frustrated over why you can’t make money consistently as a trader, you need to stop what you are doing and focus on the number one important thing for long-term success, your strategy.
In order to make money consistently your need to establish a firm mindset and a couple of great strategies to guide you through the difficulties that arise while trading.
You need short-term strategies to make the long-term success stick and the only way of doing that is to develop them one by one.
For example, a trader who starts out without thinking of how to approach the cryptocurrency he is going to trade will fail because there are so many factors that play against every trader.
However, if you develop the right skills and strategies you will be prepared to face anything that the markets throw at you.
Don’t be a loser, be a winner, and start learning your first crypto leverage trading strategy today.
Choose a leverage ratio that is comfortable for you. This varies from trader to trader but it should be high enough so that you can increase profits without sacrificing too much risk. You don’t want to over-leverage which can cause your stop losses to get hit over and over again. The best leverage level for a beginner is usually around 1:5 or a maximum of 1:10.
A safe ratio is where your entry price is not too close to the liquidation price. The liquidation price tells you where your position would be liquidated in the event that the market falls sharply. Until you hit this level, you can increase the leverage as much as your want.
This guide gives you 15 of my top strategies to use when leveraging cryptocurrencies. Read through all of them carefully and take notes where you need and try to apply them one by one.
As long as you know how to control your SL and risk it is perfectly fine to use this high leverage ratio when trading cryptocurrencies. In our high leverage crypto trading guide, we explain in-depth how to use high leverage in crypto trading.
It is a great way of increasing profits for a trader with a small account. As a trader, you need capital to make profits from your traders and this is where leverage comes in very handy. Make sure that you know how it works before you start out.
This guide has been all about the best crypto leverage trading strategies to increase profits quickly. Some of these strategies will resonate better with some traders but I recommend that you read through all of them because each one has its own value.
After reading this guide you should have a better understanding of what a crypto leverage strategy is and how to better use one in a live scenario. You should apply each strategy one by one. Don’t try to implement all of them at the same time, that will only create confusion.
As you will see, these strategies are great for controlling risk, avoiding mistakes, and pushing profits. Good luck in your leveraged crypto trading sessions and come back to this guide to remind yourself every time you make a costly mistake.
Remember to use our crypto leverage trading calculator to optimize your risk levels and profits.