What is Leverage In Crypto? Trading Guide
The post What is Leverage In Crypto? Trading Guide appeared on BitcoinEthereumNews.com.
Crypto has become one of the most active and preferred trading markets in the world, especially over the past few years. What draws traders in is the ability to bet small and still chase massive profits, thanks to the asset class’s extreme volatility. But for all the opportunity it offers, many still struggle to fully understand what trading involves, let alone how tools like leverage actually work. Leverage is one of the most widely used strategies in crypto today, but also one of the least understood. This guide will break it all down so you can approach it with clarity and confidence. What is Leverage Trading? To understand crypto leverage trading, it helps to first strip the concept back to basics. Trading, in the simplest sense, is the act of buying and selling an asset to profit from price changes. In crypto, this could mean buying ETH at $3,000 and selling it at $3,300. Unlike long-term investing, trading focuses on short to medium timeframes and thrives on volatility. The objective is not to hold but to extract gains from movement. Leverage enters this picture as a financial multiplier. When you use leverage, you borrow funds from a platform to open a larger trade than your own capital would otherwise allow. For instance, a 5x leverage means your $100 can open a position worth $500. If your position goes in your favor, your profit is calculated on the $500, not just your $100. But if the price moves against you, your losses are also amplified. This can result in liquidation, where your position is forcibly closed to prevent further losses. A simple analogy helps: imagine you want to bet $100 on a cricket match, but your friend offers to lend you $900 more. Now your total bet is $1,000. If your…
