What You Should Know About Leverage In Crypto Trading

It’s not always obvious yet it can help you stop losing money



I can’t count the number of times I’ve heard people say that you should stay away from leverage trading so as to succeed in crypto.

I don’t think this is good advice.

Nonetheless, leverage has been a hot topic since the infamous May 19 crash that resulted in one of the largest liquidation events in Bitcoin’s history.

On that day, more than $9 billion positions got wiped out due to margin calls. It was the moment that crypto critics had been waiting for.

In the weeks that followed, there was unceasing chatter around crypto regulation and unrelenting calls on regulators to rein in crypto exchanges offering crypto futures.

Seeing things were going out of control, the exchanges decided to introduce some measures. The one that stands out is the reduction of leverage that beginners can access.

Right now, Binance (where I trade futures) allows new accounts to access up to x20 leverage. Previously, you could play with up to x100 any day.

Perpetual Futures

Perpetual swaps are a type of futures contract without an expiration date that are pegged to spot prices.

But futures have a few unique attributes that you won’t find in spot trading.

  1. With futures, you can short.
  2. You can access leverage.
  3. You can see the profit and loss of open positions in real time.

I have been using leverage since Binance launched perpetual futures trading over two years ago. Like any other market, crypto futures have both pros and cons.

The best thing about leverage is that it essentially multiplies price swings.

So, if you’ve opened a trade with 0.5 ETH with 5x leverage and price moved down 10%, you’re going to lose…