Still not understanding leverage

[SiverSurfer]

Hi guys,

I just did my first leverage / margin, today but I am still clueless, this is the screenshots.

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[davis196]

Hi guys,

I just did my first leverage / margin, today but I am still clueless, this is the screenshots.

You are clueless about what?What exactly you don't understand about leverage?
The dashboard on the screenshot looks kinda all over the place.What cryptocurrency exchange platform are you using?
Leverage is like getting a loan from the crypto exchange platform to execure your orders and get bigger profits.The profits might be bigger,but the loss is bigger as well.
I advise you not to use leverage,if you don't have any experience.

[The Sceptical Chymist]

Leverage is like getting a loan from the crypto exchange platform to execure your orders and get bigger profits.

Leverage is a loan.  I'm also not sure what OP wants to know about leverage, but I agree that if he doesn't fully understand what he's doing, and the risks of using it, he shouldn't be borrowing anything to trade crypto with.

Leverage does indeed increase your profits--assuming you make money on whatever it is you're buying--but if the value of what you bought falls below the amount needed to pay back the loan, the exchange will either issue a margin call (requiring you to give them money or collateral) or sell the coin you bought, and you'll be left with nothing if they sell it. 

Margin/leverage are basically the same thing as far as my understanding goes, and they're not something newbies ought to play around with unless they can afford to lose money.  That's true for the stock market and especially true for crypto.

[atrocityx]

Can you please go into details what you don't understand, it would help alot... also it looks like you opened and closed, are you long or short? Did it not fill? Please give some more details and we will try to break it down more.. that is such a weird layout though.

[Dart18]

What did you do?
You are risking your money without even understanding what you are doing?
That is some risky move and it will hit you back in just a manner of time.

There is youtube and google already man. Better do some reading and or watching those videos just so you could have a knowledge first. 

[manggis97]

Leverage is has function to increase the profit but also will increase the level of risk too.  For example Bitcoin  today was going up 5% and you currently in long potition by leverage 5 x,  so you will get profit  5% x 5 = 25%, but if you prediction wrong and the price going down  5% you will loss 25%, and if you dont use stop loss and the price keep down to 20% you open potition will be liquidated.

[sedahan13]

Leverage trading is very risky and similar gambling, alot of trader loss from margin trading because they use high level of leverage. With high fluctuacion of crypto market, will be risky to trade crypto with leverage, and if you want to do that, just use low leverage by not more than 3x.

[Tytanowy Janusz]

Betting with $ is simple as that:
1:10 leverage means that you put into trade 100$ and exchange put another 900$ and buys coins worth 1000$. Every 1% change of price will let you earn 1% out of 1000$ what is 10$ - its 10% out of your 100$ investment. If price drop by 10% you will lose 100$ (10% * 1000$) - all your deposit. It means that exchange will have to close your position to be sure to get their money back.

You also need to realise. Your leverage is constantly changing as your position is going on.

You pit 100$ in 1:10 leverage trade. Your investment is worth 1000$ (your 100$ and exchanges 900$). Price goes up by 10%. Your investment is worth 1100$, where 900$ is still exchanges money. It means that 200/1100 = 5.5 - that your current leverage. If you want to earn on this position as aggressive as before you need to increase it.

It works in both ways.

You also need to know, that exchange will close your position much earlier to be sure not to lose on borrowing you money. That's why liquidation price is not exactly on 10% loss (with 1:10 leverage).

Its all easy as f.. But hard thing is going on with you are betting on bitcoin grow not with $ but with bitcoin itself.

Here is example for that:

You used btc worth 100k dollars (not dollars) to buy btc contract.
This is not quite that but it will help you understand:

You put 17 btc to buy btc contracts at btc price 6000$. Bitmex took your btc as deposit and put its $ to buy you btc contract (you own them 17*6000=100k but they dont have to worry because they have your 17 btc worth 100k and your contracts worth 100k). Now, when price is at 3000$ you still own then 100k $ (because they spend that much for your contracts) but your deposit is worth 17*3000$ =50k now (and your contracts another 50k) - together worth 100k - last time to close for bitmex to cover your depth. That way with 1:1 leverage - no leverage you can have liq price at 50% of coin value. Now combine this and above if you want to bet with bitcoins on bitcoins grow with leverage.

[Ispep]

When you trade via leverage,you borrow to increase your said investments,with the potentialities of higher rewards should everything go accordingly in your favor
But on the bad side of things go bad,just as you'll have big profits if it goes right,you will also bear huge loss,as you will have lost the money borrowed as well as your own personal money in the process.
Don't trade via leverage as you've got paltry knowledge on how it's run

[Obiwankenodium]

What you need to learn is the importance of position sizing. If your needed position size is higher than you can get without levetage, then yiu use leversge to be able to get the needed position size.

[Tytanowy Janusz]

What you need to learn is the importance of position sizing. If your needed position size is higher than you can get without levetage, then yiu use leversge to be able to get the needed position size.

Agreed. Even 1:100 isn't that risky if you do your money managment well. If you put into 1:100 trade 1% of your porfolio its like puting all your money into 1 trade with 1% build stoploss. All you can loose is that 1% of your potfolio.

[BitHodler]

Agreed. Even 1:100 isn't that risky if you do your money managment well. If you put into 1:100 trade 1% of your porfolio its like puting all your money into 1 trade with 1% build stoploss. All you can loose is that 1% of your potfolio.

If everyone was that smart, people wouldn't be losing their entire balance in a matter of seconds in some cases. Platforms such as BitMEX bank on people's stupidity, because they don't know that they enter a whole new level of trading.

I still see people complain about hacks and BitMEX being a scam because their position is wiped out and they lost all their money as result. For some reason people believe that they are guaranteed to make profits....

It could be all the "experts" on social media making it look like they profit continuously. Bitcoin fund manager does the same. This con artist deletes videos where he was wrong, so noobs only see the videos where he was right and made profit.

[Obiwankenodium]

What you need to learn is the importance of position sizing. If your needed position size is higher than you can get without levetage, then yiu use leversge to be able to get the needed position size.

Agreed. Even 1:100 isn't that risky if you do your money managment well. If you put into 1:100 trade 1% of your porfolio its like puting all your money into 1 trade with 1% build stoploss. All you can loose is that 1% of your potfolio.

exactly. And liquidation is cheaper than paying fee for a market stoploss order.