What Does High Leverage Mean in Crypto?

In this high leverage crypto trading guide, I will teach you the basics of how to trade crypto with high ratios and all the small details that you need to know before getting started.

Everything from explaining how it works to the important things you need to consider is included in this complete guide for beginners.

Using a high multiplier comes with added risk factors. While you as a trader are probably looking to amplify your profits it’s incredibly important that you learn what you are getting into before you start.

high leverage crypto trading guide

Leveraged trading in general is becoming more and more popular among cryptocurrency speculators and there is no doubt in my mind that this type of investment approach will keep growing for the years to come.

Therefore, I am writing this article to teach you the most important things to look out for, the biggest risks, and exactly how to get set up with a high leverage crypto exchange.

I’ve also included some of the top strategies that I use every time I see an opportunity that I want to boost with high margin trading. Keep reading to learn more.

You will learn

High leverage crypto trading basics

When using a high ratio in crypto trading it means that you are borrowing money on your margin collateral up to 100x of your initial deposit and sometimes more.

As with any leverage product, you have two parts to your trades:

  • Margin capital = Your own money
  • Leverage = The money borrowed from your broker

In a nutshell, when trading crypto with a multiplier you are essentially multiplying your account size with the chosen credit, for example, 1:100.

At 100x leverage, your potential profits and losses are greatly increased which calls for razor-sharp risk management to avoid large losses.

Both your wins and losses are amplified 100 times.

For example, if you were to trade Bitcoin with $500 without margin and you scored an 11% profit, this would result in a $55 profit.

If you instead traded the same Bitcoin contract with a multiplier, let’s say 100x, your profit would be 100 times larger, $5500.

It might sound ridiculous how much money you can make but it’s the truth and this is the main reason why traders and investors choose to add credit to their portfolios.

How to use high leverage in crypto

man choosing high leverage

There are several ways to use credit in crypto to increase profits while at the same time mitigating most of the risk.

It should generally be used when you find a trading setup with a skewed risk-reward relationship and you think the market will breakout to the upside or the downside.

A larger amount of borrowed money is not to play around with when you have no clear indication of where the market is going as this could hurt you badly or in the worst-case scenario cause leveraged liquidation.

The most optimal way to use a large ratio is when you have a high probability of success, and of course, using strategies to optimize your stop loss and other tips.

The technical part of entering a market with a multiplier is rather easy, but more on that further down in this guide.

Related: Risk Reward Ratio Calculator

Some of the best setups to use margin are:

  • Large breakouts
  • Short squeezes
  • Strong trending markets

These setups will assure that you get a good entry on your trade which is crucial to getting wiped out early on.

Most traders use credit the wrong way by trying to trade tight trading ranges.

What happens instead is that the market chops up and down with no clear direction and stops the trader over and over again.

This could be very costly since you could lose a lot of money through several losses but also leveraged trading fees.

High leverage crypto strategies for beginners

Every trader should learn some basic strategies before they take the bull by its horns, especially if you attempt to increase profits with high ratios.

Over the years of speculating in several different markets, I’ve learned how to approach margin-traded markets by making countless mistakes. In this part of the guide, I’ll share some good strategies to follow if you are going in it for the big bucks.

  1. Use Isolated margin Isolated margin is the most important setting on your trading platform. Isolated margin limits the access of your margin capital to each position. This means that if one position goes south, it won’t jeopardize the rest of your account balance.
  2. Always use a stop-loss – A stop-loss order should be a mandatory rule for all traders who operate in crypto markets. It’s the number one lifesaver when things go bad and it keeps your overall losses small and controlled. Without a protective stop, you are playing with fire.
  3. Only invest what you can afford to lose – When starting, your initial deposit should only be the amount of money you can afford to lose. Even if it’s only $200, start with that, and see how you progress. One of the reasons why brokers offer leverage is to fund traders with small accounts.
  4. Select a broker with low fees – As your ratio increases, so does your position size, and ultimately your trading fees. Your commissions are directly affected by your credit and if you use a 50x ratio, your fees will increase 50 times as well.
  5. Never hold positions overnight – When you hold positions overnight your broker will charge you a management fee, or overnight fee as it’s also named. This fee is an interest payment on the “loan” you have taken to use the borrowed capital. If you close out your positions before midnight you don’t have to pay this fee.
  6. Increase leverage on winners only – The trick to making a lot of money in crypto is to maximize the borrowed money only when you hit your big winners. If you know your market and your strategy well you will automatically notice when you are in a good trade. When this happens, press the bar to maximize the profits. Keep in mind to raise your stop-loss level to break even to not risk any extra cash.
  7. Breakout trades are key to success – Breakouts are what traders make the most money from and this is because of the risk-reward ratio. In a true breakout, the market doesn’t come back to the entry price until much later and this is where your entry will be the best. Enter just as the market breaks out and push the margin for the best results.
  8. Check several time frames before entry – It is a wise idea to check several time frames to confirm that you are trading with the trend. This is an old technique used by old-school traders but it still works. The reason why it’s so effective to check the 15-min, 45-min, and 2-hour charts at the same time is to verify that other traders are trading in the same direction.
  9. Trade only a handful of coins – Keep the number of traded coins low to not get confused by different setups, market behaviors, and just a mix of charts. It is easy to make mistakes when you take on too many charts at the same time. Make sure to only trade a handful of cryptos.
  10. Avoid short-sellingShort-selling on in crypto is difficult and should be avoided. Most of the time, the market is in a positive trend, and when it falls, it does so with violence. It’s difficult to catch a falling knife and you are better off not trying it.
    Related: How much money do you need to short sell?
  11. Calculate your leverage – If you don’t know how to calculate your multiplier in crypto you are going to have a difficult time controlling your risk. Once you know the ratio you can then better position yourself in the markets.

How to get started – step-by-step

Since borrowed funds in crypto trading is easily accessible nowadays it doesn’t take much looking around to start speculating.

It’s easier than you think. What is needed is a good exchange or platform that is widely trusted, your initial investment capital, and your trading plan.

Here is a quick step-by-step guide on how to get started.

1. Select crypto exchange (from the list above)

There are a couple of things to consider when choosing a platform. First of all, you want to prioritize security above all else. Try to select a regulated exchange.

The second most important aspect is the fee structure. Make sure that your platform doesn’t charge more than 0.10% for taker orders (market orders).

Depending on your technical analysis skills you will want to use a platform with a well-developed charting interface with all indicators included. There should be no lag whatsoever.

2. Sign up and make your deposit

When signing up, make sure that you immediately activate the 2fa verification code in the account security setting. This will prevent 99% of the attempts to steal your account.

Choose an exchange that offers either a credit card solution or bank transfer as a payment method. These are the most secure payment methods available.

If there is a deposit bonus, make sure to take advantage of it.

Use your email to sign up but choose a completely new password that you have never used before.

3. Start to trade

When the signup process is done and your account is funded you are ready to choose market and contact.

The contract you choose depends on your previous experience and knowledge.

However, if you are a complete beginner I would recommend starting with the Perpetual swap contracts since they work exactly like buying a stock without expiration dates.

From the list of markets, choose the cryptocurrency that you are interested to trade.

Now, select the ratio you want to use and then use our crypto position size calculator to find out your position size. The position size is controlled by how much margin you use combined with the amount of margin capital.

Before you enter the market, remember to select isolated margin.

4. Protect and follow the position

Always add a protective stop before you enter the market as crypto is bound to cause wild price swings.

Once you have entered the market your job is to follow the trade and take profit when the price goes in your favor.

Your P&L ratio is visible in the open position tab where you can follow the development at all times.

Once you make a decent profit, close the position with a market order.

Your profit should be visible immediately in your margin balance.

Benefits of high leverage crypto trading

There are plenty of benefits to trading in the cryptocurrency market with a multiplier. First of all, you don’t necessarily need to use all your margin capital and can trade larger positions with a fraction of your own money.

This is a very misunderstood concept and most traders assume that you need to swing for the fences just because you can.

However, many crypto traders use credit to minimize their own risk.

You could see it as lending money from the bank to buy a house. If the house burns up, you only lose 10% of the value which is the money you have put up.

Another great benefit that is the most common is, of course, the increased profits. The profits you stand to make from using margin in incredible but you need to be careful.

As mentioned earlier in this guide, you should only maximize your leverage when you think you have a very favorable trade setup in front of you.

When you detect a potential breakout or a string trend, test the market, and if it shows you an early profit you can increase the ratio.

Finally, another benefit is that you can spread out your risk over several markets.

This is difficult when you use a small account size.

The way you choose margin as a beginner is personal, but you can use it to diversify as well.

Most common risks

There are three major risks that you should be aware of:

When you enter the market with a leverage ratio of 1:75, not only will your position size increase 75 times but also your transaction fee.

If you are an active trader you must find a crypto exchange with low fees to not bleed out from high commissions.

Liquidation is your biggest nightmare and it happens when you run out of margin capital to cover your open losses. When liquidated, all the funds in your account are lost and you are left with a big 0 in your balance.

This is the difference between spot trading vs leverage trading.

In the spot markets, you can never get liquidated because you are not using leverage.

The third risk that many beginners encounter is the wild volatility that credit brings.

If you are comfortable taking losses of $20 or perhaps $50, these numbers will increase 10 times, 20 times, or even 50 times.

The best tool to combat these losses is for sure the stop-loss order.

Things to consider before starting

If you want to prepare a little extra before you start out, here are a couple of tips that will help you out:

  • Use a maximum risk of 1% per trade to avoid big losses
  • Never meet a margin call, it will only end up worse
  • Don’t use borrowed capital when you are tired, it can cost you a lot of money
  • Try not to trade from your smartphone, small mistakes can cost you a lot
  • Read up on all the products to understand which one suits you best
  • Save some of your margin capital for the big winners
  • When you earn money, withdraw some of it from the exchange

If you apply all of these tips and tricks you should be good to start.

The most important things that will keep you in the markets for the long term are your risk management and your patience in waiting for good trades.

Most frequently asked questions

What does 100x leverage mean in crypto?

A 100x ratio in crypto means that you borrow money against your margin collateral 100 times. With 100x more money, you can trade positions that are 100 times larger than your total deposit.

Final thoughts

In this beginner guide, we take a closer look at high leverage crypto trading and some of the aspects that make traders apply for this style of trading. I go through different aspects that I think every trader should know about such as:

  • The basics
  • How to get started
  • Top strategies used by myself
  • Things to consider before starting
  • The pros and cons

This is all covered in good detail and after reading this guide, you should have a good understanding of how the moving parts work and how to go about the create an account and start trading.

Anton
Anton

Anton is an expert leverage trader with decades of experience trading stocks and forex through proprietary software. After shifting over to leveraged crypto trading in derivatives and futures contracts he has become an influential figure in the cryptocurrency industry. Anton's trading strategies have helped numerous investors achieve significant returns on their crypto investments. With a keen eye for market trends and a deep understanding of technical analysis, Anton has developed a reputation as a shrewd trader who is not afraid to take calculated risks. He has a track record of predicting market movements accurately, and his insights are highly sought after by crypto traders and investors alike.

Articles: 65

Leave a Reply

Your email address will not be published. Required fields are marked *