Margin and Leverage

Boost your trades with leverage at 100X on crypto, 500X on Forex

Amplify potential returns

Trading cryptocurrency is typically seamless and straightforward unless you’re searching for much more complex options. Enter Margin Trading, which can help you to boost your profits from market swings, allowing you to execute more complex, active trading strategies. With the power of Overbit’s new and improved trading platform, you can use leverage to go long or short on a multitude of cryptocurrencies and Forex markets. You can go up to 100X leverage on cryptocurrency and 500X leverage on Forex. When you compare this to a regular spot trade, you will realize that you have 100 times the earning potential.

What is margin trading?

Margin trading is also known as leveraged trading or contracts for difference (CFD) or swap trading. Margin trading is historically widely used in trading the forex markets to magnify profits from small price movements in currency pairs. The leverage ratio that is allowed in the forex market is one of the highest that investors can use.

Margin trading allows traders to open trade positions larger than their available capital. In favourable circumstances, this translates to higher profits than what the trader would have gained without using leverage.

How does leverage work?

Leverage is the ratio between the amount a trader can trade versus the amount the trader has to place to open the trading position. Leverage can sometimes be expressed as a ratio, for example 100 to 1, or as a multiple amount, for example 100X.

Let’s say the Bitcoin price is $10,000. A trader has $1000 in Bitcoin (0.1 BTC) in their account and wants to open a BUY position using 100X leverage. To put it simply, the trader can multiply 0.1 BTC by 100. This gives them the opportunity to open a BUY position worth 10 Bitcoin or $100,000. The size of the trade is also known as the notional value.

If the price of Bitcoin increases to $10,500, the trader can close their position and take a $5000 profit, plus their original deposit. Therefore, the trader has increased their money by 5X. On the other hand, if the Bitcoin price goes down by $500 to $9,500 – the trader stands to lose the entire $1000 amount put towards this position.

If the trader opened this position without leverage, they would need to deposit the entire $100,000 or 10BTC to get the same amount of market exposure.

Please note: 100X leverage has been used to simplify the maths required for this illustration. This should not be taken as investment advice and you should only trade with high leverage at your own risk and with money you can afford to lose. Please read our risk disclosure statement for more information.

Advantages of using leverage

Magnified profits – As shown in the illustration above, you only need to put down a fraction of the notional value of the trade – yet you gain the benefit as if you had put down the entire amount.

Gain exposure to other opportunities – by freeing up your capital, you can allocate it to other trades, strategies or investment ideas.

Go long or go short – margin trading allows you to speculate on the market whether it is going up or down. If the price of a market is falling, you can open a position by selling the asset. This is known as shorting the market.

Disadvantages of using leverage

Magnified losses – In the same way that a magnified profit can be achieved, if the market moves against you, your losses are magnified too. Therefore, you could lose your entire initial capital on one trade. On Overbit, you will not lose more than your deposit. You should exercise risk management when performing your trades to minimise your losses.

Liquidation – If the market has moved against you and your price is current price is close to the liquidation price, then you will be required to deposit more funds or close the position otherwise you risk getting liquidated where you could potentially lose your entire deposit.

Funding fees – Depending on the direction of your trade could pay or receive funding fees every 8 hours. You can see this in the contract details of the market you are trading. The fee represents an interest payment that is paid to or received from the counter-party of the position you are trading. 

Popular markets to trade with leverage