What Is A "Leverage" Exchange?
Sep 9, 2021
You’re already well acclimated with different types of crypto trading, including spot trading, margin trading, and more. You’re feeling comfortable in your approach, and have become familiar with your golden rules for trading. The opportunities to learn and grow your trading activities, though, seem infinite. That’s why, today, we’re looking at leverage exchanges, so you can choose the right crypto exchange for your trading journey.
What is Leverage?
Using more money than you have in your trading account, leverage trading enables you to trade with more than what you have available. Leverage trading can be considered somewhat risky, as this type of trading requires you to go into debt to execute trades. That said, the potential for accruing extended profits grows too.
How Does Leverage Trading Work?
Leverage trading is a relatively reliable form of trading, as it's commonly used in markets and commodities with low volatility. It is, however, becoming more commonly used in crypto trading, which has expanded the demand for leverage exchanges. When you conduct leverage trading, you:
Borrow capital to execute on trades: Leverage trading means you borrow money to trade with. You’ll make a collateral deposit, and borrow money against this deposit, to generate trades.
Increase your trading position: Leverage trading enables you to execute trades using far more capital than you have in your trading account.
Create new opportunities: Leverage trading opens you up to new trading opportunities, and greater profit generation potential.
Expand on the risks for leverage trading too, not just benefits - perhaps use some maths to demonstrate the potential benefit of a 100:1 leverage and the potential loss. Ideally not for new traders since it can wipe out all their capital very quickly. Better for experienced traders.
What is a Leverage Exchange?
A leverage exchange, like the one MEX Digital provides.. MEX Digital offers leverage of 125:1. This means you can execute trades through the MEX Digital leverage exchange for a much higher value than what’s in your trading account. Put simply, if you make a deposit of $100, you can execute trades of up to $12 500, using the MEX Digital leverage exchange.
Choose the Right Leverage Exchange.
There are 5 important factors to consider when you choose a leverage exchange:
Regulation: Never trade on an unregistered, or unregulated exchange. Always ensure you confirm the credentials of any exchange you interact with. Leverage trading on the MEX Digital exchange is regulated through the Financial Services Commission (FSC) of the British Virgin Islands (BSV).
Your capital amount: Of course, leverage trading offers you great opportunities to trade beyond your capital amount. But, keep in mind that you’ll need to keep a capital amount aside for your trading. The amount of trades you can execute, and the amounts you can trade for, are directly linked to the amount of capital you can commit.
Your risk appetite: Leverage trading can help you accrue great profits, but there is always the risk of generating higher losses too. You don’t want to accrue debt that you can’t eventually repay. Keep this in mind, and trade responsibly, every time.
Your trading experience: Your trading experience, knowledge, and affinity towards a particular type of trading, is more important than you may realise.
Your leverage exchange functions: A robust leverage exchange should help you protect yourself from losses. For example, a stop loss facility is a must.
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Remember, proper diligence and sound judgement should be used in evaluating the risks associated with these activities. Trading cryptocurrency carries significant risk and losses can exceed deposits. Refer to our Terms and Conditions and disclosure material.