Leverage Amount in Cryptocurrency Trading

Initially, cryptocurrencies were perceived only as an investment or a payment method, but gradually the volume of speculative transactions began to increase.

And after assets such as cryptocurrency pairs began to be traded on the Forex exchange, the opportunity to use leverage also appeared.

This tool was first offered by brokerage companies that handle transactions on the crypto market.

Using leverage allows you to increase your trading volumes tenfold, thereby increasing your potential profits.

Do I need to pay separately for leverage?

Surprisingly, no, the fee is the spread or commission you pay when opening a trade, if the trade volume increases due to borrowed funds, then the spread size also increases.

This option is beneficial for the broker, so in most cases, brokerage companies encourage the use of high leverage and increased transaction volume.

For example, you opened an order using only your own funds, purchasing 1 lot of Bitcoin at a price of 20,000 and paying a spread of $90. The next trade you opened with 10 lots of leverage at 1:10, in which case the spread would be $900.

What leverage is available for use today?

Today, the maximum permissible leverage for cryptocurrencies is much lower than for traditional currency pairs.

Depending on the broker, the leverage ratio ranges from 1:2 to 1:50, for example:

RoboForex ( roboforex.org ) – 1:50 is the highest leverage today for these assets.

Alpari ( alpari.com ) – 1:10 is a sufficient size for scalping crypto.

Amarkets ( amarkets.org ) – 1:10 larger than average size typically offered by cryptocurrency brokers.

What leverage should I use when trading cryptocurrencies?

Ideally, nothing. This type of asset already has sufficient volatility, but, as always, you want to earn more.

Considering that the BTCUSD currency pair moves an average of 3.5-4% daily, the following leverage is recommended for short-term trading:

Low risk – no more than 1:3
Average risk – from 1:5
High risk – more than 1:10

In my opinion, using leverage greater than 1:10 on cryptocurrencies is quite difficult due to the high spreads on cryptocurrencies. Depending on the situation, the spread may be so large that the position will go into deep negative territory when opened.

For example, with a deposit of $2,000, you opened a Bitcoin trade with a volume of 5 lots and a price of $20,000, meaning the trade amount was $100,000, while a leverage of 1:50 was used, and the spread was $90 per lot.

A spread of $450, or 22.5% of our deposit, was charged. It's clear that the price only needs to move 0.5% in the right direction to offset the commission for opening the trade. However, the trend doesn't always move in the right direction, and the trade may have to be closed with an even greater loss.

Therefore, to experience the full charm of cryptocurrency trading with leverage, first try trading on a demo account with the specified parameters.