Many digital currency trading platforms have a trading method called "leveraged trading". What exactly is leveraged trading?

Leveraged trading is to leverage larger funds with smaller funds to improve the rate of return (profit or loss). Leverage can also refer to borrowing, investing with borrowed funds and paying a small amount of interest, but you can get high returns through investment. This effect of lending is called leverage effect.

Leveraged trading in currency circle is essentially the same as leveraged trading in stock market, and it is a derivative financial instrument for spot trading in currency circle.

Take life as an example. If you buy a house with a bank loan and make a down payment of 20%, the house will be worth1000000. Then you spend 200 thousand to buy a house, and the bank lends you 800 thousand. In fact, this is a five-fold lever, using your less principal to incite something of greater value. This is also called leverage.

Two. Examples of leveraged trading operations:

Many platforms provide leverage, but there are risks. The picture shows the leverage transaction of Huobi → leverage management.

(Note that the interest rate is the daily interest rate) Please click Help to view or consult the specific operation process and questions.

1. Do more:

Take BTC/USDT leveraged trading as an example (USDT against USD, 1 USDT = 1 USD). If the current price of a bitcoin is $65,438+0,000, if you judge that the price of bitcoin will rise in the near future, you can choose to do multi-leverage trading.

You only have a principal of 65,438+00,000 USDT. If the trading platform is 5 times leveraged, you can borrow another 40,000 USDT from the trading platform, so the principal is 50,000 USD T. If it is 10 times leveraged, you can borrow 90,000 USD T, and so on.

Buy 5 bitcoins with 50,000 USDT and sell them when the price of bitcoin rises to 20,000 USDT. You can get 6,543,800 USDT, after deducting 6,543,800 USD principal and 40,000 USD loan, the profit is 50,000 USD T..

If you don't use leveraged trading, you can buy 1 bitcoin directly from spot trading (currency trading) with 1 USDT, and only gain 1 USDT.

Of course, if the judgment is wrong, Bitcoin will fall to 5000 USDT, currency trading will only lose 5000 USDT, and leveraged trading will lose 50000 USDT T..

Leveraged trading can not only do multi-currency trading, but also make money by shorting.

2. Brief:

Take BTC/ USD 5 times leveraged trading as an example. The current price of bitcoin is 20000 USDT. You judge that the price of Bitcoin will drop to 1 1,000 USD T, and you have the principal of 1 1,000 USD T.. You can borrow 1 bitcoin from the platform (only short currencies can be selected) and sell it at 20000 USDT, and then sell it at1000 USD T..

Therefore, digital currency's advantage lies in providing a mechanism of adding leverage, but leverage is a double-edged sword, which not only magnifies the benefits, but also magnifies the risks. Therefore, the control of positions is particularly important.

Third, futures contract trading has a margin system, and leverage is the reciprocal of the margin ratio, so its main function is to reduce the margin, which means that investors can participate in the transaction without paying the full amount, only by paying a small amount of margin according to a certain proportion. 10 times leverage is 10% margin ratio, 100 times leverage is 1% margin ratio. For example, if I have 1 10,000 yuan, I can buy a futures contract of 6.5438+10,000 yuan, which is also the leverage principle often mentioned in futures. The amount of margin is related to the margin occupied. The greater the leverage, the smaller the margin, and vice versa. (Note: Futures trading in digital currency is different from futures trading in traditional markets. Traditional futures trading is based on legal tender, while digital currency's futures trading is based on trading currency. )