Topic: Trading with leverage (Read 110 times)

Even I am always against leverage trading, when you are having good capital then you may go for availing low leverage as part of your risk assessment to trade in good volume. The best practice must be cashing small target but when we are trading in higher volume then you can make decent profits in the end.

Simply, we cannot ignore the benefits of leverage trading completely but how you are making use of it would be the deciding factor here. I mean we do not need to be afraid of availing leverage but we need to be more careful with it.

To be honest, I would not associate trading and credit in one offer. This may not have the most positive consequences for a trader. But in this case, the risks are also too great.

AThis was a very risky adventure using a 3x leverage increases the volatility of your trade and also increases the possibility of blowing out your account on a single trade. What if the price fell below the 20 MA you would have smelt heart break. For me you took a very big risk.

With higher leverage the downward moves multiplies with the number of leverage you took while trading. Buying Bitcoin @ $10k with a 3x leverage implies if there is a down ward move it would go 4x the supposed price and Bitcoin doesn't just move in one direction for every rally up there is a slight downward move. You just took a big risk in all

Just for reference in this example. If you opened 2x long position at $10,000. The Liquidation price would be set at ~$6,690. Let say Bitcoin went all the way to $65K without ever crossing the $6,690 liquidation price, but then it started dropping from $65K to $20K. Your position would still be safe. The only difference will be the change in the value of your unrealized profit and maybe fees due to funding rate.

Your margin only gets liquidated once the mark price drops past $6,690

Thank you for the explanation, that's what I had always assumed but then I got a little concerned when I thought it could run the other way. In that case I suppose if you were lucky enough to buy a leveraged position towards the start of this bull run, say October last year for $12k then you could quite comfortably just sit on that and hoddle it safe in the knowledge that you are unlikely to ever be liquidated unless something goes drastically wrong with Bitcoin.

Because when you enter, you basically borrow 50% of your capital in usd to buy 1 btc (eg you use 2x leverage), then the liquidation benchmark is the same as the position when you enter. That is, you will be liquidated if the btc hits $5k.

BTC @$10k = $5k yours and $5k from the broker. So it doesn't matter what the percentage increase in btc is, because here you don't bear the liquidation of 1 btc, but 5k usd.

cmiiw

You kind of been lucky to trade with leverage and come off it with no regret and that is because the bitcoin market is on the bull for now and whoever is trading with leverage have no challenge but if price drops it is a problem as you will be liquidated. As you have the advise for using stoploss is important. Learn more about leverage and don't always take the chance, you may not be lucky.

Thanks man, I appreciate the feedback. TBH I was kinda expecting to get lambasted for trading leverage without fully understanding how it works  

Admittedly I didn't use a stop loss with this trade, however would be planning to do so if I make any further leveraged trades in future.

Just to confirm though, as I bought in with 3X leverage at about $40k and BTC is now at $66k, if BTC were to suddenly go back to $40k I should be down to somewhere around my initial stake rather than being liquidated because BTC dropped over 33% from on a 3X from $66k, is that correct?

Trading long  Bitcoin on breakouts is not a bad move for me, especially breakout on an all-time-high. Some people also tend to open a long position on the pullback after the breakout, but sometimes it is not going back anymore after the breakout. So, it's difficult to be sure about this.

About the leverage you used, it is good for me, having low leverage on this kind of trade is good, make sure you don't forget to put your stop loss and price target based on your risk:reward ratio.

Hi, I've taken a bit of a gamble by buying Bitcoin with a 3X leverage that I was planning to YOLO all the way up to ~$80k - $90k BTC on the basis that I didn't think BTC would go back to 33% below where I initially bought in any time in the near future. I bought in when Bitcoin was around the 20 week MA so this has fared well so far but I realise this was a risky move, particularly considering I don't actually fully understand leveraged trading.

I'd always assumed that if in order to be liquidated BTC would need to go down 1/3 from my initial buy in but I just had a thought that got me concerned.

Let's say for arguments sake that I bought in $1000 with BTC price at $10,000 which has now doubled to $2,000 after Bitcoin went up to $13,333 (I'm not sure that my math is right but anyway).

I would assume that Bitcoin would have needed to go down $6,666 in order for my initial stake to be liquidated and I was assuming that this would still be the amount that Bitcoin would need to go to, however now I'm a bit worried that my initial stake is irrelevant and that Bitcoin would need to drop 33% from the $13,333 that it's at now in order for me to be liquidated meaning that no matter how high Bitcoin goes, if it goes down 33% from that high I could be liquidated.

Just in case that explanation wasn't clear enough, if you bought 1 BTC at a 2X leverage when BTC was $10k in October last year and rode it all the way up to $65k and you had something like $120k BTC at that point, would you then have been liquidated when BTC dropped  over 50% to $29k or would your BTC have just gone down to the same as it would have been at $29k on the way up?

Is it possible that somebody could confirm which of these is correct please?

Thanks