Bitcoin Leverage Trading Platforms

Bitcoin leverage trading platforms have become one of the most widely-used trading platform types online today, with thousands of traders and investors speculating on the price movement of Bitcoin using leverages of up to 100x.

This lucrative adaptation to normal trading requires careful planning and risk management, and when these are in place profits that are not normally close to being possible can be achieved.

One of the more attractive considerations is that even during flat trading, leveraging can be used to gain substantial returns, where normally the lack of volatility would prevent this.

But for newer traders, fully understanding what Bitcoin leverage trading is and also the various different options available for platforms that provide Bitcoin margin trading, is important before taking any action or setting up an account.

Leverage trading can be one of the more opaque facets of trading for new traders to understand, and so we’ve put together a definitive guide to unmask the world of Bitcoin leverage trading.

We’ll be covering things like what Bitcoin actually is, how it works, what leverage trading it, risk management strategies used by professional traders, and the best Bitcoin leverage trading platforms online today to choose from.

What Is Bitcoin?

Bitcoin is the world’s leading cryptocurrency, having being created in 2007 by an anonymous group or individual known as “Satoshi Nakamoto”, and today being worth hundreds of billions of dollars in value.

Bitcoin is traded online on cryptocurrency trading platforms, where thousands of different traders speculate on the movement of the price of Bitcoin.

Bitcoin trading today has become one of the most popular ways to make money online, and in recent years has seen a huge influx of new traders joining the market.

Bitcoin can be used as a typical currency to pay for goods and services and to store value, however, the way that Bitcoin is managed and controlled is dramatically different to any national currency.

How Does Bitcoin Work?

Unlike fiat currencies like USD or EUR, Bitcoin doesn’t have a central bank that manages its operation, production, and distribution.

The founding principle of all cryptocurrencies, but especially Bitcoin, is the decentralization of power and decentralization of control.

In the place of a central bank, Bitcoin has computational algorithms that run autonomously and without the ability to be manipulated by outside forces.

What this means is that anyone that uses Bitcoin does so without needing permission from anyone, and without having to provide personal details or enter into agreements.

Bitcoin is open-source, and even the creator of Bitcoin could not just give themselves free BTC if they wanted to. No one person has control over it and that is a large part of its appeal to so many people.

What Is Bitcoin Mining?

A big part of decentralizing a commercial ecosystem based around trade is to have a method of sharing the role of processing trades between many different parties.

Normally, a bank will be solely responsible for deciding which transfers and payments are valid, and will store all of the data regarding that in private on their own servers.

The Bitcoin ecosystem uses a technology called “blockchain” in order to allow for the permission-less and trust-less transfer of value between globally dispersed parties.

A key component of blockchain is how consensus is reached on which transactions are legitimate and which aren’t.

The ingenious way that this is handled is by a competition called “Bitcoin mining”, in which many different computers try to solve complex cryptographic puzzles and whoever wins is allows to decide the next group of transactions, along with getting a reward of free Bitcoin.

This means that no one party can decide who can use Bitcoin and who can’t.

What Is Leverage Trading?

Trading financial assets is not only one of the most popular online commercial activities today, but also by far one of the potentially most lucrative.

Each day trillions of dollars globally are transacted online, with many different types of assets being available to trade such as forex, cryptocurrencies, stocks, indices, commodities, metals and derivatives.

At its most basic level, trading is profiting from their price of an asset going in the direction that you speculate that it will — either by buying the underlying asset or by creating a “long” or “short” position.

While trading in this way can in itself be profitable, there are many times that an asset may not be very volatile, meaning that sideways trading reduces the amount of profit that can be generated.

Also, traders may develop strategies that are reliably profitable, therefore finding ways to amplify that reliable profit may be prudent.

This is where leverage trading comes into play.

Leverage Trading: Amplifying Profit

Leverage trading is the process of borrowing funds from a broker in order to create trades that are of a larger size than would typically be possible.

When a leveraged trade is created a certain amount of an asset, known as the “margin” is provided and held by the broker.
The margin is smaller than the amount borrowed, and the total size of the leveraged position depending on the size of the margin and the amount of leverage being applied.

Leverage may be anywhere from a ratio of 1:2 up to 1:1000 depending on the trading platform being used and the asset being traded.

As an example of normal trade, if a trader has $1,000 and believes that the price of Bitcoin will increase, they could purchase $1,000 worth of Bitcoin and if the price goes up 5% they will make $50.

The leveraged version of this trade might be to apply 1:100 leverage. What this would mean is that the $1,000 available would be able to create a $100,000 position, where the same 5% increase in price would generate $5,000 in profit.

What are the Best Bitcoin Leverage Trading Platforms Online Today?

PrimeXBT

PrimeXBT is the world’s leading cryptocurrency brokerage following exponential growth through 2019, and the introduction of many new features as well as traditional asset classes like forex, stock indices and commodities as well.

The platform has built a reputation for having a powerful trading engine that’s capable of processing 12,000 trades per second, as well as professional charting technology and an intuitive interface.

This combination has made PrimeXBT accessible to both experienced and novice traders and has cemented its place as one of the best trading platforms around today.

PrimeXBT offers margin trading on all assets, with the largest leverage in the industry on all cryptocurrencies of up to 100x, along with shorting on crypto-assets like Bitcoin, Ethereum, EOS, Litecoin, and XRP.

PrimeXBT’s fees are also one of the lowest in the industry, with a flat rate of 0.05% applied to all trades.

Traders can use other powerful features on the platform also such as PrimeXBT’s Investing module, created in a partnership with a leading crypto exchange, Covesting, and which allows all traders to create their own bespoke investing funds.

eToro

eToro is one of the world’s leading social trading platforms, which until recently had a heavy focus on traditional assets such as commodities, stocks, and forex, but now has included cryptocurrencies like Bitcoin in the listings as well.

eToro provides margin trading on all asset classes, and for cryptocurrency allows for leverage of up to 1:2. This is significantly lower than PrimeXBT’s 1:100, which is an area that eToro could certainly improve upon.

Where cryptocurrencies only have a maximum of 2x leverage available, other assets like stocks and forex have up to 400x available, depending on the asset class being traded.

Other than this, however, eToro is a powerful platform offering novice and expert traders the ability to easily and quickly create an execute trades across a wide range of different markets.

eToro has good security in place, with the platform never suffering a hack to date. This is mainly as a result of the platform only providing cryptocurrency derivatives instead of actually trading cryptocurrencies themselves.

The platform also has a solid trading engine that executes trades quickly, with enough liquidity to allow for reduced slippage and preferred entry and exit points.

Kraken

Kraken is one of the oldest cryptocurrency exchanges and has provided its clients with a high-quality service for much of its life.

A range of different crypto-assets are available on Kraken including Bitcoin, Ethereum and EOS, and margin trading of between 2x and 5x if on offer.

While there are a number of pros to using Kraken, including the fact that the platform has never been hacked, there are also a few drawbacks to consider.

Krakens leverage ratios are low, and we would prefer to see higher leverage available here. Also, Kraken typically has lower liquidity than other platforms on the list, but hopefully that will increase over time.

What Are The Advantages Of Leverage Trading Bitcoin?

Bitcoin trading itself is potentially one of the most profitable online activities, with Bitcoin’s typically volatile price movements fuelling higher the potential to generate revenue at a rate often higher than with any other financial asset or instrument.

Although trading Bitcoin without leverage is profitable, as with any activity, there are always was to improve how it is done and ways to do it more efficiently and effectively.

A metaphor for trading Bitcoin with leverage might be using a car to race with which has a larger engine. There’s every chance of winning a race just based on driving skill alone, but by fitting the car with the best engine possible, there is a greater chance of winning more often.

Leverage trading Bitcoin has a few distinct advantages.

Profitably Trade In All Conditions

A trader can easily make large profits when the price is moving quickly in bull markets and bear markets, but often price action is reduced within a small range for prolonged periods during very low volatility.

During these periods even the best traders can struggle to generate profit because it is simply not possible. Low volatility means a low potential to profit from trading Bitcoin.

But with the use of leverage, traders can turn low volatility periods into periods where they can generate as much, if not more, revenue from trading Bitcoin.

If the price is constricted within a small range of 0.1% of the total price of Bitcoin, typically this would mean that even perfect trading could only net 0.1% profit — and that would be if each trade was perfectly executed.

But with leverage of 100x, for example, that 0.1% profit would become 10% profit for the same trades. In fact, even if the trades only took half of the available price moves each time they would still generate 5% profit per trade.

Maximize Profit On Already Profitable Strategies

A number of strategies can be devised which reliably generate revenue. While this may not be a huge amount, strategies like scalping can use algorithms or be manually executed using a set of rules and indicators in order to create profitable trades more than 50% of the time.

In these situations, traders can enhance the way they trade by leveraging trades they already know are likely to be profitable, but might not be enormously profitable.

By doing this traders use their investment more efficiently, and maximize the amount of profit they generate.

What Are The Best Risk Management Strategies?

Risk management is an important component of any strategy, especially when margin trading is involved.

While people can often focus on the risk of using high leverage, professional traders often use the leverage of up to 1:1000, but they do it with carefully planned risk management procedures in place.

By using risk management, leverage can be one of the most powerful tools that a trader has available to them because the use of leverage can reduce the cost and exposure of creating trades that can generate the same revenue with a single trade than would usually require the risk of many trades.

Implementing risk management should take up a good portion of any planning time, and there are a few techniques available.

Using Stop Losses To Be “Stopped-Out” Instead Of Liquidated

High-quality margin trading platforms provide a range of different order types to be able to implement risk management. For example, PrimeXBT provides traders with the ability to create stop losses and OCO (one-cancels-the-other) orders which protect traders from unwanted counteractive move in price.

By using stop losses, traders can set up a trade and then if it does go the wrong way, know that the maximum that can be lost is only a designated amount.

This is important because being stopped-out is preferable to be liquidated, and stop losses are the best way to control this.

Setting Limits To Be Able To Spend Each Day

It’s a natural part of trading that some trades win and some lose. The best traders in the world don’t get 100% win rates, they just develop strategies that are highly profitable overall.

By setting a maximum amount that can be lost in one day, traders prepare themselves for a string of losing trades, and if they happen this mechanism gives them time to cool down for the day and to assess what they could do to improve their strategy.

The alternative to this is repetitively creating more and more losing trades without a limit, and this means that traders can get caught up in the moment and lose sight of the bigger picture which is to manage successful, profitable strategies.

In Summary: Bitcoin Leverage Trading Platforms

Bitcoin leverage trading platforms provide the ability to generate higher levels of profit, while also allowing traders to generate profit in all conditions — not just during high volatility.

Today, more and more new Bitcoin leverage trading platforms are coming online, and this is as a direct response to the huge numbers of news retail traders flooding back into the market over the past 12 months.

Where in the past most cryptocurrency trading platforms were basic and only provided simple trading features, today traders are most sophisticated in general and have a demand for platforms that provide advanced functionality such as those mentioned above.

Margin trading Bitcoin and other cryptocurrencies are now seeing huge growth where many traders are moving away from making less profitable, unleveraged trades, and are turning towards new opportunities to maximize revenue.

With the growth of Bitcoin leverage trading over the past few years, its popularity is only likely to further improve the trading platforms that provide margin trading services to the cryptocurrency market.