Last modified
November 7, 2022

Recommended Signal Trading Leverages

A resource on recommended leverages to use while trading signals.

You can follow a crypto trading signal with the given leverage (if one is provided), but you may also choose your own leverage. Let's go through what leverages are for those who aren't familiar with them and explain them thoroughly.

What is Leverage Trading

You can trade with a greater margin (or initial investment) if you utilize leverage. For example, if you have $100 and use a 20x leverage, you will be entering the trade with a $2000 margin. Many crypto derivate exchanges show a bigger percentage gain than the actual margin, therefore this is primarily in the background. For example, Binance Futures does not boost your margin by 20x (for example). Instead, it multiplies the percentage gain by 20x, so if a coin moves 1% (up or down), your position will have moved by 20%. Although, the coin only moved 1%.

How does a leverage impact your trade

When you use leverage, you effectively increase your risk by the leverage amount. When trading with a 20x leverage, you only have room for a 5% price fluctuation because you risk being liquidated while using leverage, but more on that later.

If you're trading with a low margin, leverage can really help you out, but your margin should always be in line with your leverage and risk. This is a difficult concept to describe because traders interpret risk management differently.

How liquidation works with leverage trading

You run the danger of losing your entire position when trading with leverage since you can only lose the money you put in. Let's say you wish to open a long trade on BTC/USDT with a $100 investment and a 20x leverage. So if the price of BTC rises, you earn, and if the price of BTC falls, you lose. Because you can only lose your $100 and not the $1900 that you "borrowed" from the exchange, the maximum BTC decline is 5%. The arithmetic is straightforward: 100/20 = 5, 100/(leverage) = (percentage).

Tips for Trading with Leverages

We advise keeping your leverage as low as possible considering trading with high leverages carries a lot of danger, but it may also be quite profitable. However, as you may already be aware, not every trade will be profitable, so manage your risk carefully.

Based on our margin and estimated Risk Reward Ratio (RRR), CP Signals Group trades with a 3-10x leverage. You may determine this yourself by configuring your take profits, stop loss, and margin (or initial investment). Although CP Signals has providers that trade with considerably larger leverages (up to 125x), we propose that our users reduce their leverages in order to make a safer and occasionally better trade (even if it ends up negative).

Where can you trade Cryptocurrencies with Leverages?

You can trade with leverages on many cryptocurrency exchanges, some of the most popular include Binance Futures, KuCoin and FTX. These derivatives exchanges are by far the most used & trusted by many leveraged crypto traders, but they are not alone as there are many other exchanges that also offer trading with leverage so I suggest you do your own research and find the exchange that suits you best.

Contributors

Jesse
Founder