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Leverage in trading refers to the use of borrowed capital to increase potential returns.

Leverage involves borrowing a certain amount of the money needed to invest in something, in the case of the business world, a stock. In terms of cryptocurrency trading, leverage allows a trader to put up a fraction of the trade’s total value. But the trade can be leveraged by up to 100 times, which means profits and losses are hugely amplified. It's important to note that while leverage can magnify profits, it can also amplify losses. High leverage, particularly where the borrowed money exceeds owned assets, comes with a high level of risk.


If a trader uses 10:1 leverage on a $100 capital to open a $1,000 position on Bitcoin, and Bitcoin's price increases by 10%, the trader would earn a $100 profit, doubling their original capital.


Trading and Markets
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