How to Trade with Leverage: A Beginner's Guide

Leveraged trading is one way to increase the size of a position without having the full amount on your balance. Such trading allows you to use borrowed funds from an exchange or broker to open a deal of a larger volume than you have in your account. Leverage allows you to get higher profits even with small market movements, but it also increases the risks, which should not be forgotten.

What is leverage in trading

The essence of leverage is to give a trader the opportunity to operate with larger volumes without the full amount. For example, leverage of 1 means that you trade only with your own money. And leverage of 100 allows you to manage an amount 100 times larger. Such high leverage is convenient for short-term trading, when even the slightest price fluctuations are important.

How does leverage work? You open a position, the platform blocks part of your amount as collateral (margin), and the rest is “added” by borrowed funds.

Where to trade with leverage

Today, leverage from brokers and crypto exchanges is available on many platforms. For example, Bybit allows you to trade with both small and aggressive settings - from 1x to 100x. Leverage is also available on Binance, Bybit, OKX, HTX, Gate. io and BingX. The main thing is to choose a reliable and proven exchange. To automate strategies and a safe start, you can register on the Veles platform and use trading bots adapted to work with leverage. Bots will save you from many trading incidents, especially if you are just starting out.

How to choose a leverage level

Choosing the right leverage level is essential for any trader. Since not only potential profit depends on it, but also the scale of possible losses. It is important for beginners to understand the essence of leverage and not chase large numbers, because the higher the leverage, the higher the risks. Especially in the world of cryptocurrencies, where the price can change dramatically in seconds and minutes. 

So, let's take a closer look at how leverage works. You borrow additional funds from an exchange or broker to open a larger position. For example, with $100 and a leverage of 10, you trade $1,000. Your actual capital remains the same, but profits and losses are calculated from the entire position amount. And if the market moves against you by just 10%, your deposit will be completely zeroed out - the leverage will be closed or liquidated. 

That is why it is important to understand what leverage is the safest. For beginners, it is optimal to use values from 1x to 3x. Such leverage allows you to feel the dynamics of trading, while leaving room for error. A leverage of 1x does not increase risks at all, because you are trading only with your own funds and this is the safest option to start with. If you have experience and are ready to manage risks, you can increase the leverage to 5x-10x. But it is important to remember: with each increase in leverage, the permissible price movement against your position decreases. With a leverage of 100, for example, just a 1% change in the other direction is enough — and you lose everything. Therefore, such levels are only suitable for professionals trading intraday with a clearly verified and tested risk management. 

It is also necessary to consider what leverage your platform allows you to trade. For example, the buybit can be manually adjusted before each trade, which is convenient for flexible trading. Some brokers' leverage is fixed, while others give freedom of choice. On many crypto exchanges, you can change the leverage directly in the order, as well as reduce it or even trade completely without leverage.

Another important point is the asset you are trading. Volatile altcoins require less leverage because they can “shoot” in any direction. And stable pairs, such as BTC/USDT, allow slightly higher leverage because they move more slowly. If you understand the dangers of leverage, you will not use it at random. Instead, you will start small, test the strategy, analyze the risks, and only then decide to increase. And of course, you should always know how to cancel leverage or how to close leverage if the situation gets out of control.

Ultimately, the ideal leverage level is not the maximum, but the one that matches your experience, strategy, and readiness for drawdowns. Start small, trade consciously, and use those tools that allow you to control the situation, for example, trading bots and analytics on the Veles platform. These tools will help you not only save your deposit, but also grow steadily in the world of leveraged trading. 

What is liquidation and margin call

When a trader starts trading with leverage, he actually borrows part of the funds from the exchange or broker to open a larger position. These borrowed funds provide the potential for high profits, but at the same time increase the risks.

Liquidation is a forced closure of a position by the exchange when losses approach the amount you contributed as collateral. That is, if you opened a deal with a leverage of 10, then when the market moves against you by only 10%, the system will automatically close the position. This is done so that the exchange can return its borrowed funds. This process is called closing the leverage, and it happens without your participation, unless protective orders were placed in advance.

Margin call, in turn, is a warning from the platform that your balance is on the brink and you urgently need to replenish your account or close part of the position. A signal that the margin - collateral for borrowed funds - is reduced to a critical level. If you ignore this signal, liquidation will occur. Exchanges usually notify you about this via the interface or even email, especially if high leverage or an unstable asset is used.

It is important to understand what the danger of leverage is - in the high sensitivity of the position to market fluctuations. Even a slight movement against your trade can lead to a complete loss of your invested funds. This is especially true for volatile assets traded with high leverage. To avoid liquidation, you need to correctly calculate the trade volume, set stop losses and use moderate leverage levels. It is also useful to know how to close the leverage manually - this can be done at any time, fixing the profit or loss before the system intervenes and closes you at the liquidation price.

On the Veles platform, you can build strategies with automatic exit upon reaching a specified level of losses, which allows you to bypass the margin call and not bring the situation to liquidation. It is also convenient for those who use bots and cannot constantly monitor the market.

Strategies for trading with leverage

Trading with leverage opens up new horizons for traders to increase their profits, but it requires a thoughtful approach and the right strategy. By allowing them to manage large positions with limited capital, leverage amplifies the effect of even small price movements. However, it is important to remember that as potential profits increase, so do the risks, so trading with leverage should be built on proven strategies and discipline.

One of the most common strategies is to use low leverage for long-term investments or medium-term trading. Here, leverage usually does not exceed 2x–5x. This approach allows you to maintain flexibility and reduce the likelihood of quick liquidation, especially if the market shows volatility. In this case, traders focus on fundamental or technical signals, holding a position for a long time and fixing profits when their goals are reached.

For those who prefer active trading, a leveraged scalping strategy is well suited. The strategy consists of a series of short trades with small profit targets during the day. High leverage here helps to get a significant return even from minor price changes. Scalpers closely monitor charts and use technical indicators for precise entry and exit. They minimize the time spent in a position and limit risks with stop losses, as well as fixing profits at the market or with limit orders (in case of sharp price movements).

Another popular strategy is trading on breakouts of levels using leverage. When the price breaks through an important support or resistance level, it often makes a sharp move in the same direction. Traders use this moment by opening positions with leverage to maximize profits from the trend. It is important to correctly calculate the position size and place protective orders so as not to fall under the influence of sharp rollbacks or false spikes of levels, which are happening more and more often in the market.

Do not forget about the combination of trading bots with leverage. Automation allows you to set risk management parameters, the moment of entry and exit from a position, as well as stop loss and take profit levels. Bots help maintain discipline, which is very important when working with leverage, since human emotions can lead to rash decisions and bitter losses.

Tips for Beginner Traders

For those who are just starting out in the world of trading, especially with leverage, it is worth realizing that success comes through knowledge, discipline, and gradual accumulation of experience. Do not immediately strive for high risks - on the contrary, it is better to understand the basics and learn to control each transaction.

The first and most important piece of advice is to start with minimal leverage or even trade without leverage. During this time, you will understand how the market works and will be able to avoid quick losses associated with high volatility. If you are a beginner and want to understand what leverage is best to trade, then just remember: the lower, the safer.

It is necessary to remember that the leverage of brokers and exchanges provides only an opportunity, and not a guarantee of success. Do not blindly follow other people's recommendations, it is better to experiment on backtests or with small amounts to find a suitable strategy for yourself. Gradually, you will learn to understand what the danger of leverage is for you and how to minimize it.

Don't forget about constant learning and analyzing your trades. Keeping a diary will help you track your mistakes and successes, as well as make more informed decisions in the future. Use available resources, educational materials, and trader communities to share experiences.

And finally, automated solutions such as trading bots, which allow you to set rules and follow them without emotions, will be excellent assistants for beginners. On the Veles platform, you can set up a bot with minimal risk and gradually expand its capabilities as your experience grows.

Following these simple tips, you will significantly increase your chances of successful and, most importantly, stable trading, and using leverage will not be a source of risk for you, but an extremely useful tool for achieving financial goals.

FAQ

What is leverage and why is it needed?
This is a tool that allows you to increase the volume of a transaction without having to have the entire amount. It is suitable for increasing profits, especially on small price movements.

How does leverage work in cryptocurrency?
You open a position for an amount exceeding your balance, using borrowed funds from the exchange. Profit and loss are calculated from the full amount of the position.

Is it possible to trade without leverage?
Yes, leverage 1 means trading only with your own funds, without using borrowed funds.

How to close leverage manually?
Just close the trade in the terminal or using the “Close Position” function. You can also set up automatic closing by condition.

How to reduce risks when trading with leverage?
Use low leverage, set stop losses, trade according to a strategy and do not risk the entire amount on one trade.