Today we are looking at Binance Margin Trading and probably more importantly just trading with leverage in general and how to do it without too much of a risk.
So, you’re not going to sort of overexposed yourself and lose all of your money, which is a pretty highly likely win whenever you’re going to trade using leverage. So let’s check out Binance news today.
Here we can see that Binance hikes leverage to 125 x 4 launch of its bitcoins have a futures exchange and yes, it used to be 20 x and now they’ve now put it all the way up to 125 x.
Now, you may well already know that Binance now it’s made over a billion dollars over the last year.
They’re one of the biggest exchanges if not the biggest exchange in the crypto spear. But with this new 125 x that they’re offering they could well see those profits skyrocket to maybe like 10 billion dollars next year.
Who knows what’s going to happen? So anyway let’s check out what it means for you and how you can actually profit from leverage it.
How to get profit from Binance Margin Trading
We’ve just a standard limit order on Binance if you wanted to buy up to 100 dollars’ worth or maybe even a thousand dollars’ worth of bitcoin. You can do it right here on the exchange but you’re limited to whatever funds you actually have available.
We have leverage, in you can essentially borrow some money from the exchange so that you can have a bigger position.
Say, if Bitcoin were to rise by 5 % rather than just making 5 % of a thousand dollars, you’d be making say 5 % of 10000 or 5 % of hundred thousand dollars’ worth of bitcoin. So there’s a lot of potentials to make a lot of money a lot quicker, unfortunately, the truth is the odds are in the favor of the exchange.
So, if you are using leverage only ever do it when you’re pretty much on a sure thing and you’re not going to take too much risk that you actually risk losing everything.
So now we’re going to have a look at just what those figures are, and how much you could risk losing at different amounts of leverage.
What are the Leverage & Risks of losing it
So, first up we’ve got what is leverage and this has just been pulled straight from the Internet and it says leverage involves borrowing a certain amount of money needed to invest in some things pretty much what I just said right.
In the case of crypto, money is borrowed from the exchange and the crypto trading does offer highly. What does this say? Crypto trading does offer high leverage in the sense that for the initial margin requirement at Trader control a huge amount of value, which is pretty much what I just said.
So I’m sure by now you understand you get what leverage is. If you didn’t know so already, let’s just check out what this actually means.
So here we’ve got the stakes. We’re suggesting a hundred dollar stake is what you’re putting down and this is the leverage. So just one x basically no leverage at all. You just get in one to one ratio you get 100 dollars’ worth of bitcoin.
So just as in what we were looking at if you’re on Binance, you’re buying 100 dollars of bitcoin you get 100 dollars with of Bitcoin. And if you want to take that hundred dollars’ worth of bitcoin off the exchange you can do that.
However, if your leverage in so you put it in a hundred but you get in ten thousand dollars’ worth of bitcoin, you can’t take that money off the exchange, it’s just stuck on the exchange because your stake is still just 100.
You haven’t borrowed the money. You don’t have it. So, we have two times leverage. One hundred dollars would be a 200 dollar value position that you’re holding and 5 x would be 550 X would be 5000.
This is all from the same 100 dollars and then we’ve 100, 100 x on 100 dollars would be ten thousand dollars stake, that you’ve got in there in the position on Binance, which is a lot substantially more than 100 dollars all-out loss over here.
But you can see is how much the market would need to lose in value for you to lose 100 % of your investment i.e. to be all out as an all-out loss, basically what would be no normally as a margin call on a normal trading platform.
So, if you add 100 dollars and you just put 100 dollars of bitcoin straight value then bitcoin would need to go to zero. It would need a 100 % loss on and on the value of bitcoin for you to lose all of your money, which with bitcoin is pretty much not going to happen which is why I switched from trade in forex and other things over to crypto.
And if you’ve seen some stuff before, how I got into crypto with the bitcoin multiplier effort back in 2017 turning out five 500 dollars into like 11000 plus.
That was all done with no leverage whatsoever last just buy in crypto for what it is because it’s so volatile on its own you don’t really need the leverage. However, if you were and you were going to buy a 100 dollar stake and we have two times leverage then the price needs to just go down by half.
You do realize that?. So if you’re buying Bitcoin at 8000 dollars and Bitcoin falls to 4000 dollars even though it’s only 2 two times leverage, you’re done, you’re out the market and Binance takes your money and if it was five times leverage then it only needs to go down by 20 %.
So, quite obviously if you put in at ten which it was at 10 just a few weeks ago and then it’s gone down to eight. You’re out the market you’ve lost all of your money. Whereas if you bought in at 10 and you just bought bitcoin at a normal price, normal value no leverage. You’ve still got money.
And then if it’s times 50 it’s just 2 percent and at 100, 100 x it’s 1 percent and as we just saw Binance has now increased the amount of leverage to 125 on their futures trading platform. So the actual figures on that is 0.8 % of a loss.
So, Bitcoin you’d normally see on COIN market cap and it’s up and down all the time you know like 5, 8 percent in a day, no problem at all. But we have 125 x. It only needs to go down by 0.8 of a percent.
And Binance set to legally keep all of your money you are gone out the market and right now, we’ll just have a look at what that looks I can Binance.
So this is the usual limit where you would buy. You just hit the market. So now you’re just buying at pure market price then you’ve got to stop limits. Up here we’ve got margin trading as we can see. I do not have a margin account and we’ve what I’ve just said maybe now you can see why.
And now they’ve also got the futures x 20 so this is brand new over here and you can see it here at the top it says 20 X and it is now customisable leverage. So if you click that you can just up your leverage now all the way up to 125.5%.
But remember very mind a loss of just naught 0.8 % in the price of Bitcoin. And you have lost 100 percent of your investment. It is all down the drain.
And on this hourly chart of bitcoin, let’s just take a look at what that 0.8 % is let’s just make the math simple shall we? And we’ll just look at 100 times leverage that’s going to be a 1 percent loss for you to lose all your money which at say 8000 dollars would be 80 dollar loss.
So, if we just have a look you can see this is a 1 hourly chart. So we’ve just took a bit of a loss here recently so this is a 70 and in one hour it was all the way down 8-7-7-8-9. Yeah, it is. That’s well over 80 so that one you’d have been all the way out. In fact this little one here this is 7-9-6-3 down to 7-8.
Yes. So that would have been about 80 as well that would have taken you out the market. So you can see here how easy it is to just lose all of your money at like 100 X you know 125 X it would be insane.
Just look in here on COIN market cap you can see crypto is generally there up to 3 %. I mean you know 5 % in a day no problem whatsoever.
In fact, if we just have a quick click on that you can see this coin here is actually up 47% in a single day. And there’s a lot of them there you know up over 5 %. No problem at all. And the same in the down downwards as well. You’ve got down 8% , 7% & 5%.
Cryptocurrency is horrendously volatile and because of that, you do not need leverage. So leverage was really made for the traditional markets, things like 4 X, the indices stocks things that don’t really move all that much in terms of price.
And because of that for the exchanges to entice more investors to invest more often and do more sort of day trading type activity, they allow for leverage so that people will sort of trade in the day, trade in those really small price movements and actually still be able to come out profitable or at least have the opportunity to possibly come profitable.
But when you trade in something volatile like cryptocurrency, there’s just no need for it is just an excuse for the exchange to take everybody’s money. If we have a look now at some forex, this is the U.S. dollar against the Mexican peso.
I believe it is so. And this is from 2016 up to the present day. And over those last few years, the Mexican peso has been up to twenty-one dollars at one point and then back down to seventeen and a half dollars average in around the sort of nineteen dollar mark.
So, in those two years sort of up in two years, that’s four years. Right? It’s been up and down a couple of dollars, each way of nineteen and a half dollars say so or nineteen dollars up and down just a couple of dollars each way. However, when we take a look at Bitcoin, you’re going to see a very different story.
So looking at Bitcoin the same time period 2016 today, you can see this is based on Binance and it wasn’t around back then but you can see the price of bitcoin here was 3000 and then in a very short space of time it was 20,000 dollars.
So that sees not just a couple of dollars that’s a gain of like 17,000 dollars and then it lost 17,000 dollars back down to 3000 again then up to 14 and now back down to where we are now at 8000 dollars.
So you can see the crazy roller coaster world of cryptocurrency and if you’re going to tell me that you need to put some leverage on there to make some money. I don’t know what you’re doing wrong in trading. You really do not need leverage at all.
However, if you do use it in such a volatile market, then the chances are you’re going to lose your money pretty quick, so great news to Binance.
I do really like Binance and I’m glad to see them making really good profits. I just hope they’re not taking money from your wallet and that’s about it for today.