My Margin Trading Guide

Margin trading is basically using borrowed funds to trade. The more leverage I take on, the bigger the potential gains but also the risk of losing it all. If Bitcoin takes a dive, my position can get liquidated based on these numbers: With 2x leverage, I'm done if the price drops by 50%. With 5x leverage, it's a liquidation at a 20% drop. 10x means I'm out if it drops by 10%. At 50x leverage, I get liquidated if the price falls by 2%. With 100x leverage, it's a liquidation after just a 1% drop. At 400x leverage, I'm liquidated if it drops by 0.25%. And with 500x leverage, it's a 0.20% drop that does it. Also, keep in mind that interest and other fees hit my position right away, and if I don't meet the maintenance margin, that trade could end before I even get close to zero balance. Plus, slippage could leave me owing the lender after taking a loss.

You are talking about margin trading or derivative trading? I asked because I have only seen 10x before on margin trading account on all the exchanges that i have been using. 3x for isolated and 10x for cross margin. But I have seen up to 125x, 200x and up to 500x for bitcoin on derivatives before. The use of high leverage shows how many traders are gamblers.

Hi there! The same liquidation math applies to spot margin and derivatives because both involve borrowed money. Like you mentioned, spot margin leverage is capped much lower than derivatives... but leverage is leverage regardless of the product name.

leveraging and other forms of derivatives trading is pure gambling and you will 100% lose ALL your money sooner or later. Avoid it like the plague. I have been telling newbie traders this for years but they still insist on trying and failing for themselves. Even at 1.1x leverage you can (and will) lose all your money. You know what is the same as 1x leverage trading and will not get you liquidated, no matter how much % the price goes down? Spot trading. So even if a trade goes bad by 70% you will still have the same amount of coins as you did before. All you have to do is wait for the price to go back up.

Your 1.1x leverage example is relevant. Over time, interest and other charges will raise that to 2x and beyond, even if Bitcoin price is unchanged.

Should note that if you use cross margin account it will be different, liquidation will happen only when you are running out of margin in your account and that cheatsheet above only relevant if you are opening trade in an isolated margin account. You could be opening a 2x leveraged position but not getting liquidated even when the price dropped 50% because you have margin to maintain it in your cross margin account.

Hello there! Your 2x position doesn't liquidate at ~50% because you added collateral, so it's no longer 2x.

In my years of experience, I rarely see the more professional traders exceed 2x to 3x leverage on their positions because they believe going as high as 10x looks more like playing the lottery rather than a sustainable strategy to employ or adopt for long term profitability. At about 100x or 500x anything can happen suddenly in a blink of an eye and that's why it's good to stick to a safe leverage position.

There is no such thing. If such thing existed, everybody would use it become rich. Some people though, indeed make big money from trading but it is quite obvious to me that you are not one of them. It is because winners don't share their secret sauce with the public and the reason is simple. Sharing their secrets would kill their own profit margins.

Does 1.1x leverage exist? Never seen that on margin or in futures. On 1x leverage you will never be liquidated on this setup, but take note of funding fees when holding a position its either negative or positive fees. That's why newbies need to learn about risk management. Without proper risk management, even if you use low leverage, you can still lose a big amount. Using high leverage in margin or futures should always have an SL; that is the important use of this feature. Spot trading is completely different; when you buy an asset, you own it completely and will never be liquidated.

Those leverages don't exist in most derivative market, but theoretically you can borrow from exchanges lending platform against your collateral, so if you have 1 ETH you can make it collateral and borrow some USDT to buy ETH again. Leverage between 1.1x to 1.9x usually involves borrowing.

Any instrument derived from an underlying crypto asset is, by definition, a derivative. Leverage has nothing to do with the classification—whether it's a future, an option, or a CFD (Contract for Difference). In fact, 100x leverage has been a standard in Forex CFDs long before the crypto market even existed. High leverage (like 100x) is actually a vital tool in HFT (High-Frequency Trading) and order book scalping. These traders execute numerous trades with very tight stop-losses. They look for "walls"—levels in the order book with a high concentration of limit orders. Even in a bullish trend, it takes time to absorb a massive cluster of sell orders. This usually leads to a brief pullback. A scalper might aim for a $5 move on 1 BTC with a $3 stop-loss. Without high leverage, the return on capital for such a tiny spread simply wouldn't be worth the effort.

I hope that your cheat sheet will help you realizing very high risk of leverage tradings so that you never use leverage for your trading positions. Hopefully, you won't use the cheat sheet for your leveraged trades and think or believe the cheat sheet will help you secure your trading capital, the collateral and won't lose money in this market when either Short squeeze or Long squeeze occurs. Let's use the cheat sheet to avoid leveraged trading rather than fall to it, and lose money similarly to people who don't know about or don't have the cheat sheet.

Your last lines are more important than all the others. I would say, calculate in everything, the fees, the slippage allowance, the error margins. Then suddenly everything becomes dangerous at high leverage where even your 0.2% fees make a big difference. Not for everyone, probably actually not for 99% of traders (and remember trading itself is not for 99% of people).

I think the reason why winners don't usually share their tactics, is because they are too busy making money. Or, they are just being humble. So they keep quite instead. But even if they share it for example, they might still get attacked, thinking the strategy they share isn't working but the truth is, the market is also changing. That being said, there is no way that their strategy will got killed. Trading is different. This is not what you think like a culinary market where the secret sauce/recipe' must be kept inside a small bottle and then kept again in a vault, since that can give a threat to the original owners once it got stolen by the thieves, or nearby competitors.