When it comes to buying and selling actual cryptocurrency, traders typically look for opportunities when the market is moving upward. In comparison, trading financial derivatives like Contracts for Difference (CFDs) or Futures enables speculation on rising and falling markets. This allows traders to potentially benefit from the Cryptocurrency market, regardless of which way it is trending.
Another benefit of CFDs and Futures is the ability for traders to use leverage. Leverage acts as a multiplier, allowing traders to start with a smaller initial acquisition. Of course, leverage also brings additional risks, which traders should be aware of and ready to manage before entering the market.
One of the leading online brokers offering both Crypto CFDs and Crypto Futures is PrimeXBT. With PrimeXBT, traders can benefit from flexible leverage of up to 1:200 on both Crypto CFDs and Futures. This article will cover the broker’s leveraged trading options, including how they work and the benefits and risks involved.
Leverage & How It Works
Financial leverage allows traders to take larger positions on the market with a smaller upfront deposit. This helps make trading more accessible to a wider audience. With PrimeXBT’s leverage up to 1:200 on Crypto CFDs and Crypto Futures, traders can multiply their deposits up to two hundred times. Leverage works both for fiat and Crypto deposits, which PrimeXBT offers. When trading with leverage, a certain amount of funds in a trader’s account are held as required margin. This helps secure open positions from liquidation if the market moves unfavourably. A basic example of how leverage works can be seen below.
Example
The price of Bitcoin is at $59,500 and a trader wants to open a buy order of 1 BTC/USD. Using x200 leverage, the required margin to open the trade would be:
Required Margin = 59, 500 / 200 = $297.50 or 0.005 BTC in this scenario.
That means the trader would be able to place a trade of 1 BTC, which to buy outright would cost $59,500, with less than $300. If the price of Bitcoin then went up, the leverage used would help multiply any potential profits earned. For example, if the price of BTC were to rise by just 1% to $60,095, the trader would double their money, earning a profit of $297.50.
This basic example helps show the benefits of leverage – lower initial acquisition and larger gains. But margin trading can also be risky, as leverage can make potential losses larger. Traders need to be informed and ready with a risk management strategy before placing their first trade.
Managing Risks with Trading Tools
A good risk management strategy is extremely important for any trader looking to benefit from leveraged trading. PrimeXBT offers traders various tools to help manage their risk when trading both Crypto CFDs and Crypto Futures. These include limit orders, like stop loss and take profit, which give traders more control over the execution price of their trades. With a limit order, a trader can set prespecified price levels at which buy or sell orders will trigger, although these can not always be guaranteed, especially in volatile markets.
By setting a stop loss level, traders can protect the funds in their account in cases where the market moves against them. Traders can set a stop loss at a price level of their choosing. Once the price reaches that level, the stop loss triggers, closing the trade automatically and protecting against further losses. Take profit levels work similarly, but instead of protecting from losses, they help lock in profits. Once reached, the trade is closed automatically, helping protect profits against potential trend reversals.
Conclusion: The Key to Leveraged Trading
Leverage can be a powerful trading tool when used correctly. The benefits include being able to open larger trades with less money, and potentially multiplying gains. The risks, however, must be managed appropriately, as if not, this can also lead to higher losses. Traders should ensure they are well-informed about how leverage and margin work, as well as the risk management options available to them.
With PrimeXBT, traders can benefit from up to an impressive x200 leverage on both Crypto CFDs and Crypto Futures, with various tools to help manage risk. When added to the broker’s competitive fee structure – from 0.05% for Crypto CFDs and 0.01% for Crypto Futures – it makes PrimeXBT a great choice for anyone looking to get into derivative trading.
Learn more about PrimeXBT’s leveraged trading options.
Disclaimer: The content provided here is for informational purposes only and is not intended as personal investment advice. Past performance is not a reliable indicator of future results. The financial products offered by the Company are complex and come with a high risk of losing money rapidly due to leverage. Virtual assets are inherently volatile and subject to significant value fluctuations, which could result in substantial gains or losses. These products may not be suitable for all investors. Before engaging, you should consider whether you understand how these leveraged products work and whether you can afford the high risk of losing your money. PrimeXBT does not accept clients from Restricted Jurisdictions as indicated in its website.
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