Bitcoin leverage trading is a financial derivatives transaction that uses leverage to amplify the transaction amount. By providing margin to a broker, traders can trade with more capital than they actually have available, magnifying potential profits but also increasing the risk of potential losses.
#What is Bitcoin leverage trading?
Bitcoin leverage trading is a method of financial derivatives trading that enables traders to trade with amounts higher than their actual available capital. Through leverage, traders can magnify potential profits but also increase the risk of potential losses.
How leverage trading works
In Bitcoin leverage trading, traders provide a certain amount of margin to the broker, and then can use a certain proportion of the funds (leverage rate) for trading. For example, if the leverage is 10x, then a trader can trade a contract worth 10 Bitcoin with a margin of 1 Bitcoin.
When the price of Bitcoin rises, traders' profits are magnified by the leverage ratio. However, if the price of Bitcoin falls, traders' losses will also be magnified. If the loss exceeds the margin amount, the trader will be forced to make a margin call or be forced to close the position.
Advantages of Leveraged Trading
Risks of Leveraged Trading
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