In short, leverage is the extra funds used to trade more assets when you only use a small amount of investment capital. These additional funds are borrowed from third parties in the form of margin.

Generally, when a trader wants to buy an asset worth $1,000, he can buy an asset of $3,000 if he uses 3 times leverage. When the market rises by 10%, a 30% profit can be obtained. At the same time, if the market drops by 10%, it may lose 30%. When encountering an upward trend, not only can the loan be paid off, but also the benefits can be maximized.

Although such transactions seem to be a win-win situation, novices are often advised to avoid highly leveraged transactions because the risks are just as great. In order to allow professional traders to obtain greater returns, Wisebitcoin’s insurance fund can help their assets withstand market fluctuations in perpetual contracts.

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How can leverage help your trading

Leverage can effectively use trading capital, and it allows traders to bring greater results without fully using capital. Minimize transaction capital and maximize revenue.

For example, suppose a trader has a principal of $30,000 and decides to buy 1,000 tokens at a price of $30 per digital currency. With 3 times leverage, traders can purchase 1,000 tokens at a cost of $10,000. The remaining $20,000 principal can be used to invest in other tokens.

Another advantage of leverage is that it can also reduce the risk of overall capital concentration. For example, in the above example, if a trader invests all $30,000 in a project, then there is a risk of losing more money. Leverage uses only a portion of the principal, which is $10,000, to reduce this risk, so the trader loses less principal.

Now let’s take a look at how leverage works in the digital currency market.

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Leverage in digital currency

Compared with traditional markets, digital currency market transactions tend to have greater volatility. Traditional investors usually hold assets for many years, and digital currency transactions often take advantage of this greater volatility to obtain huge profits through fast trading.

It is very common to borrow money from an intermediary platform for post-margin trading. Many experienced traders who are familiar with this trading method are eager to use the volatility of digital currencies to obtain greater returns in a short period of time.

Traders can also use leverage when market prices change. The problem encountered at this time is that after price changes continue for a period of time, traders must wait until other options disappear and new market trends and price changes appear.

When the price change is small, the gain is also small. Therefore, the use of leveraged trading when the price of digital currency is rising is a good strategy that can expand returns.

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The necessity of Wisebitcoin insurance fund

High leverage often brings high risks, especially when the market is volatile. When investing in fiat currency, investors can often insure their stocks to a certain extent to avoid losses (if any). In the digital currency market, Wisebitcoin’s insurance fund will be useful when prices are extremely volatile.

Can buy a certain time for traders, so as to avoid causing greater losses. As the Wisebitcoin team explained earlier, this is to prevent a position from being automatically settled, that is to say, if it can be executed in accordance with the clearing price in the market, the position will not be closed.

Insurance funds are applicable to perpetual contract transactions within the exchange. This is an additional method taken by traders to prevent excessive volatility in the trading market when trading with leverage.

High leverage trading not only helps traders to trade with the lowest capital, but also allows traders to obtain higher returns. Wisebitcoin combines permanent contracts, insurance funds and 100 times leverage. As long as you find suitable trading opportunities, you will have enough tools to realize your income.

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