Leverage Trading Guide

Trading with leverage is a high risk/high reward method of trading that allows investors the opportunity to make higher returns than what traditional trading can offer.

Trading with leverage involves borrowing capital from an exchange in order to control larger positions than a user holds in their account. Traders with a smaller portfolio can use leverage in order to increase the potential profit of their trades.

There are three important figures to consider when leverage trading:

margin/collateral: the initial amount a trader holds in their trading account that will be put up for trading

leverage: the multiplier by which the margin/collateral will increase

position size: margin x leverage

Here's an example:

I deposit $200 worth of funds into solar perp bot so I can leverage trade with a 10x ratio.

My collateral is therefore $200, while my leverage is 10x. My position size is therefore $2000, meaning that I have $2000 worth of funds I can trade with. Being able to trade with $2000 obviously brings more potential gain than being able to trade with my original $200.

The most popular ways to leverage trade are by placing either LONG or SHORT margin trades.