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Title: Need help to understand leveraged trading Post by: matrix zion on May 23, 2017, 12:14:28 PM Hello people
So I'm a bit new to leverage trading especially. I'm trading on Kraken and I have this situation: I opened a long at 2.091$ for 0.4BTC so around 800$ at a 5:1 leverage So right now price is 3.5% higher. If I close my position I'll earn about 30$ and that's what I don't understand! 30$ is what I would have earned with buying 0.4BTC at 2.091 and selling it at the current price. Where is the leverage effect here? As I was doing a 5:1 leverage trading my actual profit should be 150$ no? Need help ^^ Title: Re: Need help to understand leveraged trading Post by: Catmony on May 23, 2017, 12:39:38 PM This article could be helpful for you to understand what is bitcoin margin trading with leverage http://www.newsbtc.com/2015/03/16/dummies-trading-bitcoin-leverage/
Margin trading have way higher fees than normal trading so for small price change you may not get significant profit. Title: Re: Need help to understand leveraged trading Post by: HTracer on May 23, 2017, 02:05:19 PM Leverage effect there was in using 5 time less amount of USD to buy 0,4 BTC. And then the profit is $30 indeed in given example. Thinking about it like a kind of borrowing to buy.
I strongly suggest to read attentively rules about margin call if it haven't done yet. Take care if market turned against open position, a margin trader is limited to hold loss position. Title: Re: Need help to understand leveraged trading Post by: Miz4r on May 23, 2017, 02:07:35 PM Hello people So I'm a bit new to leverage trading especially. I'm trading on Kraken and I have this situation: I opened a long at 2.091$ for 0.4BTC so around 800$ at a 5:1 leverage So right now price is 3.5% higher. If I close my position I'll earn about 30$ and that's what I don't understand! 30$ is what I would have earned with buying 0.4BTC at 2.091 and selling it at the current price. Where is the leverage effect here? As I was doing a 5:1 leverage trading my actual profit should be 150$ no? 5:1 leverage means that if you have say $1000 sitting on an exchange that allows 5:1 leverage you can open a margin long for up to $6000 worth of Bitcoin (your $1000 + $5000 borrowed for leverage). You can also open a long for $800, but then you are not actually using leverage because you have more than that sitting on the exchange already to cover that ($1000). |