High Leverage Crypto Trading Guide
In this high leverage crypto trading guide, I will teach you the basics of how to trade crypto with high leverage and all the small details that you need to know before getting started.
Everything from explaining how high leverage crypto trading works to the important things you need to consider is included in this complete guide for beginners.
It goes without saying that using high leverage 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.
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 trading platform.
I’ve also included some of the top strategies that I personally use every time I see an opportunity that I want to boost with high leverage trading. Keep reading to learn more. If you are only looking for crypto exchanges with high leverage, I’ve added some jump links below that you can use for faster navigation.
You will learn
High leverage crypto trading basics
When using a high leverage 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 high leverage ratio you are essentially multiplying your account size with the chosen leverage, for example, 1:100.
Both your wins and losses are amplified 100 times.
For example, if you were to trade Bitcoin with $500 without leverage and you scored an 11% profit, this would result in a $55 profit.
If you instead traded the same Bitcoin contract with high leverage, 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 leverage to their portfolios.
How to use high leverage in crypto
There are several ways to use high leverage 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.
High leverage 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 best use of a high leverage ratio is when you have a high probability of success, check out our high leverage trading strategies to learn more about when to enter the market.
The technical part of entering a market with a high ratio is rather easy, but more on that further down in this guide.
Some of the best setups to use high crypto leverage 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 get wiped out early on.
Most traders use leverage 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 through leveraged trading fees.
Where to trade crypto with high leverage
The most common platform to trade crypto with high leverage is a cryptocurrency derivatives exchange that offers leveraged crypto products such as Swaps, Perpetuals, Futures, Options, and Lite contracts.
When choosing a crypto exchange to trade on you always want to join one that fits your needs and is not too expensive.
If you don’t know where to start, here are some of the more favored names:
All these platforms offer high leverage up to 125x, low fees (0.075% – 0.10%), and great user interfaces.
Both BitYard and PrimeXBT are regulated which increases the trustworthiness and cements their credibility for users that want to focus on security.
The most important thing to look out for is that the platform you choose has a protective stop-loss functionality.
This is an essential part of protecting your downside risk while trading with large positions.
While you are researching your crypto exchange make sure that it is also equipped with a good charting interface, 2FA verification, and most of the top 100 altcoins available.
CFD platforms also offer leverage for crypto assets which is another good option if you don’t want to use a crypto exchange.
High leverage crypto strategies for beginners
It goes without saying that every trader should learn some basic strategies before they take the bull by its horns, especially if you attempt to increase profits with high leverage ratios.
Over the years of speculating several different markets, I’ve learned how to approach highly leveraged 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.
- 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.
- Always use a stop-loss – A stop-loss order should be a mandatory rule for all traders that operate in leveraged 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.
- Only invest what you can afford to lose – When starting out, 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.
- Select a broker with low fees – As your leverage ratio increases, so does your position size, and ultimately your trading fees. Your commissions are directly affected by your leverage and if you use a 50x ratio, your fees will increase 50 times as well.
- 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 leverage. If you close out your positions before midnight you don’t have to pay this fee.
- Increase leverage on winners only – The trick to making a lot of money with high leverage 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 leverage bar to maximize the profits. Keep in mind to raise your stop-loss level to break even to not risk any extra cash.
- 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 leverage for the best results.
- 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.
- 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.
- Avoid short-selling – Short-selling on high leverage 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?
- Calculate your leverage – If you don’t know how to calculate your leverage in crypto you are going to have a difficult time controlling your risk. Once you know the leverage ratio you can then better position yourself in the markets. Use our leverage crypto calculator to find out exactly how much margin capital is needed to open your positions.
How to get started – step-by-step
Since high leverage in crypto trading is easily accessible nowadays it doesn’t take much looking around to start speculating.
In fact, 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 personal 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.
From the list of markets, choose the cryptocurrency that you are interested to trade.
Now, select the leverage ratio you want to use and the position size. The position size is controlled by how much leverage 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 high leverage in 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 of trading the cryptocurrency market on high leverage. 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 your can.
However, many crypto traders use leverage 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 leverage 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 your an early profit you can increase the ratio.
Finally, another benefit of trading crypto with high leverage is that you can spread out your risk over several markets.
This is something that is difficult when you use a small account size. The best leverage for 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:
- High fees
- Unforeseen volatility
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 it is absolutely crucial that you find a crypto exchange with low fees to not bleed out from high commissions.
A liquidation is your biggest nightmare and it happens when you run out of margin capital to cover your open losses. When liquidated, all your 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 using a leverage ratio that is 1:1.
The third risk that many beginners encounter is the wild volatility that leverage 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 leverage 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 leverage 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 to wait for good trades.
Most frequently asked questions
Among the platforms that I have recommended in this article, StormGain and PrimeXBT give the highest leverage of 1:500 and 1:1000.
BitYard and ByBit both offer crypto traders leverage of 100x and more.
100x leverage in crypto means that you borrow money against your margin collateral 100 times. With 100x leverage, you are able to trade positions that are 100 times larger than your total deposit.
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
- Best crypto exchange with high leverage
- 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.