What is Leverage in Crypto Trading?
Leverage trading is also called margin trading, and it involves using borrowed crypto from brokers to make investment decisions.
Leverage trading is a tool that crypto traders use to make spot transactions through the funds they borrowed from crypto brokers.
For margin trading that ends up being successful, it is a great means of maximising profits by increasing the trader’s purchasing capacity.
Though this may come with its advantages, it still has some risks. For instance, there is the probability of making huge losses from the margin trading of cryptocurrencies.
Trading platforms require users to deposit tokens into their accounts which act as collateral, before they can do margin trading.
If the market moves in the direction that the margin goes below the threshold, the user has to add extra funds to their account or risk being liquidated.