1. What is leverage trading？
Leverage trading is a method of trading assets using funds provided by a third party. When compared to regular trading accounts, leveraged accounts allow traders to obtain more capital, allowing them to leverage their positions. Essentially, leverage trading amplifies trading results so that traders can obtain greater profits on successful trades. Due to the high level of market volatility, it could also bring much higher risks therefore please ensure to have a full understanding of the risks in leverage trading and be prudent of your own investment decisions.
2. How to achieve buy long in leverage trading with prediction that token price will rise?
Taking BTC / USDT as an example, if the platform supports up to 3 times leverage. When you expect that the price of Bitcoin will rise from 10,000USDT to 20,000USDT, and you have a principal of 10,000USDT so you can borrow up to 20,000USDT from the platform. Use 30,000USDT to buy 3BTC at 10000USDT and sell at 20,000USDT. Profit 3BTC * (20000-10000) = 30000USDT. If you only trade with your own 10,000 USDT, you can only make a profit of 10,000 USDT. Use 3x leverage trading to increase your earnings by 3x!
3. How to achieve sell short in leverage trading with prediction that the token price will fall?
Taking BTC / USDT as an example, if the platform supports up to 3 times leverage. When you expect that the price of Bitcoin will fall from 20,000USDT to 10,000USDT, and you have a principal of 10,000USDT (0.5BTC) so you can borrow 1BTC from the platform. Use 20,000USDT to sell 1BTC and buy at 10,000 USDT and earn 10,000USDT. If you only trade with your own 10,000USDT, you cannot sell short but only buy low and sell high.
4. How are interest rates calculated in leverage trading?
Interest rates are calculated daily at the time of applying for the leverage, and it will still be calculated as for assets borrowed for 1 day if less than a day. The interest of the previous day is automatically deducted from the account every morning and the borrowed assets + interest of the day will be returned when the leverage is repaid.
5. What are the risks of leverage trading?
Leverage uses lesser funds to realize the possibility of obtaining greater returns. However, if there is a wrong prediction of trading direction, it could amplify the losses therefore ordinary traders are advised to avoid high-leverage position trading to prevent liquidation or even margin call.
6. How to reduce risk ratio in leverage trading?
- Use leverage multiples reasonably to control positions;
- Take profit and stop loss in a timely manner and close the position spontaneously;
- Timely margin call to ensure that the ratio of total assets to leverage is greater than 110%.