Only a few things in life can turn $10 to $1000 within a short period of time; margin trading and trading leverage tokens happens to be one of them. However, it is also very easy to turn $1000 to $10 with these two types of crypto trading.

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_{Created by me on PicsArt}

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Crypto Margin Trading

Margin trading involves using money you don't have to trade so that you can make big profits. But how do you use money you don't have? It is simple, you borrow it. Therefore, crypto margin trading involves borrowing extra money from a crypto exchange or other traders in that exchange to trade.

Take note of the word 'extra' in that definition. It is extra because in crypto margin trading you need to have money to borrow. You cannot use $0 to borrow any money in crypto Margin trading. While you can enjoy big profits on borrowed funds, know that only you will bear the burden of loss.

Example

Note: To make the examples easy to understand, I will not include the commission fee you have to pay to the exchange.

Profit on Spot Trading

Let's say I have only $20 in my wallet on an Exchange. If I use the $20 for Spot trading and I make a 50% profit. The 50% profit is based on my $20 capital. That is;

$20 × 50% = $10

So my profit will be $10.

Profit on Margin Trading

Now, let's say I still have only $20 in my wallet. And I invest the $20 at 10x in margin trading. Since I'm investing at 10x, my initial capital will be multiplied by 10. So, if I make a 50% profit from margin trading, the profit will be based on ten times my initial capital. That is;

$20 × 10 × 50% = $100

So my profit will be $100.

Wow! That's great!

Yes it is, but it isn't always great. It gets tricky when you make a loss. See what happens when you make a loss before you jump into it. Let's go back to our example.

Loss on Spot Trading

For instance, my investment of $20 yielded a loss of just 10% in Spot trading. That is;

$20 × 10% = $2

My loss will be $2. Hence, I still have $18 remaining in my balance.

Loss on Margin Trading

I invested $20 at 10x in Margin trading. If I have a loss of 10%, the calculation is;

$20 × 10 × 10% = $20

Since my loss is $20, it means that I no longer have any money with just 10% loss. I will recieve a notification that I have been liquidated.

From the above examples, we can see Margin trading has two sides; the sweet side and the bitter side. Below are the benefits and limitations of Margin trading.

Benefits of Crypto Margin Trading

1. You have access to more funds to trade.

2. You can make massive profits with little capital.

3. It increases the rewards one would normally make from a single trade.

Limitations of Crypto Margin Trading

1. It is very easy to lose all you money.

2. With just a 10% loss, you can get liquidated. Whereas this would not happen on Spot trading.

3. Since the risk is very high, you need to do a lot of analysis before performing any transaction.

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How to Plan for Crypto Margin Trading

It is important to plan before engaging in crypto Margin trading because it is very risky and the crypto market is too unstable. Below are things I will do before I start crypto Margin trading.

• Analyse the crypto market: Before entering a trade you need to understand the crypto market. Is it in a bear market or a bull run? During bear market altcoins suffer a lot. So if you buy a coin during this period you may end up losing your money. That said, if it is a bull run, make sure to choose the right coin.

• Carefully choose a coin: When choosing a coin you need to be careful. You have to study the chart patterns, lows and highs, and if its price is affected by tweets from popular persons.

• Take your time to analyse the asset: How can you buy a cryptocurrency without analysing? It is like marrying a stranger, which will most likely lead to a broken marriage. So take time to analyse the asset, using all the available forms of analysis; sentimental, fundamental and technical analysis. However, focus more on the last two.

• Know when to enter a trade: One reason why many people lose their money in cypto Margin trading is because they don't know the right time enter a trade. Since the prices of assets in the crypto world goes up and down. It is wise to enter a trade when the price is low and not when it is at a all time high.

• Exit the trade the right time: Sometimes, because of greed we refuse to leave a trade even when we have already made a profit. Right before very eyes, that asset can just dump and we could lose our investment.

• Run away from margins that are too high: The higher the margin the higher the risk of losing your money. For instance, you invest $20 at 50x, an ordinary 2% loss can liquidate your investment.

• Don't allow your emotions to control you: In Margin trading, the easiest way to lose money is to trade with emotions. Fear, greed, an over-excitement are emotions you must learn to control.

• Read the Margin trading rules of the exchange: Each crypto exchange have have their unique rules. So try to read the Margin trading rules of an exchange before making any investment. Do not assume it will be the same with other exchanges. You might regret it.

• Invest a little amount: If you are new to Margin, start by investing little amount. As time goes on and as you begin to understand how it works you can start increasing it little by little.

• Make shot-term investment using chart with short-time frames: When analysing a chart use time frames like 5 minutes or 15 minutes. And make short-term investments because you pay commissions for the funds you borrowed.

• Have a strategy: Some important strategies to have is setting a stop loss and setting a profit limit. This will protect you during Margin trading.

Try to stick to the plan, because it is one thing to have a plan and it is another thing to follow it. Do not get too comfortable and then forget your plan.

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Crypto Exchanges and Margin Trading Rates

Different crypto exchanges provide different margin trading rates. It ranges between 3x, 4.8x, 5x, 10x, 50x, and 100x. As crazy as it sounds, some exchanges like BEX500 even offer 200x.

Most of these exchanges offer cross and isolated margin. The simple difference between cross margin and isolated margin trading is that cross margin involves two cryptocurrencies, while isolated margin trading involves just one.

Let's take a look at some exchanges and their margin trading rates below.

• Bybit
  Bybit has two margin packages; cross margin and isolated margin. They offer up to 100x.

• BitMex
  Also, BitMex offers both cross margin and Isolated margin. And the margin rates can reach up to 100x.

• Deribit
  On Deribit exchange, you can alson engage in cross margin and isolated margin at up to 100x.

• Huobi Global
  Huobi Global is my favorite exchange when it comes to margin trading because they don't offer crazy rates. In addition to cross margin and isolated margin trading, they have what is called customer to customer margin. They have a maximum margin rate of 5x.

• PrimeXBT
  PrimeXBT is another exchange that offers crazy margin rates that reaches up to 100x.

Like we discussed earlier, the higher the rates, the higher the risk of losing your money. So lower rates are usually more reasonable.

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Leveraged Tokens Trading

This type of trading is where all you knowledge about price forecasting becomes extremely important. You are making money from your ability to predict the future prices of a particular cryptocurrency. If your prediction is right, you'll receive money for it.

It doesn't matter whether the price goes up or go down. What matters is that your prediction have to be right. This means that you can make money even if the prices of coins are going down. However, not all coins have the ability to be traded as leveraged tokens. Some selected ERC-20 tokens can be traded an leverage tokens.

Since you are making money from predicting the value of the coin, you don’t need to have the coin. All you need to do is subscribe to a particular position and once you achieve your particular target you redeem your positions.

Terms used in Leverage Tokens

• If you subscribe to UP or BULL version of a coin, you are saying the value or price of the coin will go up.

• On the other hand, if you subscribe to the DOWN or BEAR version of a coin, you are saying the value or price of the coin will go down.

Difference in terms

Spot Wallet	Leverage Tokens
Deposit	Subscribe
Withdrawal	Redeem

Example

In this example we will be looking at SUSHI. I will be using a close view because it is advisable to do short-term trades on leveraged tokens

_{SUSHI Coin chart on Binance}

The chart above is for the normal SUSHI coin. The price of SUSHI has down up by 8.36%. So the chart is in favour of DOWN or BEAR.

Now, let's see how this affects SUSHIUP and SUSHIDOWN chart.

_{SUSHIUP chart on Binance}

As a result of the loss in value of SUSHI coin, SUSHIUP has gone down by 13.48%.

_{SUSHIDOWN chart on Binance}

Hence, SUSHIDOWN has gone up by 19.92%. So users who predicted that SUSHI coin will down have gained some profits.

Benefits of Trading Leveraged Tokens

1. Even if the prices of coins are going down, you can still make profit by subscribing to DOWN or BEAR versions of a coin.
2. You can get profits from coins you don't have in your wallet
3. Since your investment is leveraged by the exchange, which means your profits will be higher than what you would have made in Spot trading.

Limitations of Leveraged Tokens

1. You are exposed to greater loss than Spot trading.
2. You can lose all your investment.
3. Investment in this type of trading has a very high risk.

How to Plan for Trading Leveraged Tokens

Before you start trading leverage tokens you need to have a plan.

• Study the market: To be a successful leverage tokens trader you need to understand the market. So do you research and try to learn a lot from other traders, crypto forums, Telegram groups, Twitter and other sites.

• Select a coin: After sudying the market, you can then proceed to pick a coin.

• Analyse the coin: Once you have picked a coin, you should use sentimental, fundamental and technical analysis to examine the fluctuation of prices of the selected coin.

• Enter a trade the right time: Determine the best time to enter a trade. Do not subscribe to UP or BULL when the price of the coin is going down.

• Control your emotions: Do not let pride, greed, fear, or any other emotion control your behaviour. Try to understand yourself and be in control of your actions.

• Invest what are willing to lose: One thing you must know is that anything can happen in the crypto market. So don't invest money will need urgently. Invest little funds that you can afford to lose in case the market disappoints you.

• Implement trading strategies: Set a stop loss and profit limits to prevent you from making a mistake.

Crypto Exchanges and Leveraged Token Rates

Like Margin trading, leverage tokens have different rates across different exchanges. It varies from 3x, 4.8x, 5x, 10x to the crazy rates offered by BitMex at 100x leverage.

• KuCoin
  KuCoin offers up to 10x leverage.

• Kraken
  Kraken, on the other hand, gives a leverage up to 5x.

• Pionex
  Pionex is a US based exchange that have one of the best trading bots in the crypto space. Pionex offers up to 4.8x leverage.

• Coinbase
  Coinbase is among the biggest crypto exchange in the world. Coinbase gives up to 3x leverage.

• Huobi Global
  Huobi Global offers up to 3x leverage.

• Binance
  Binance exchange is simply too popular. It is had to find someone in the crypto world that hasn't heard of Binance. They offer up to 4x leverage.

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Forcasting the Price of a Coin

In this part of the homework I will analyse SWIPE using the SXP/USDT pair, and I will use technical analysis to predict what the price will be in a week's time.

_{Fig 1. Screenshot from tradingview.com (SXP/USDT)}

From the chart above, I can see a resistance at 5.178 price level. This resistance was briefly broken on May 2nd and then SXP fell on May 4th.

_{Fig 2. Screenshot from tradingview.com (SXP/USDT)}

Currently, SXP is using the previous resistance level as a support at price level 4.943. This is not the first SXP is turning a resistance level to a support level.

_{Fig 3. Screenshot from tradingview.com (SXP/USDT)}

In Fig. 3, we see two instances where SXP turns a resistance level to support level. This shows that this coin is in a bull run and is strong evidence that this coin will pump.

_{Fig 4. Screenshot from tradingview.com (SXP/USDT)}

Therefore, my prediction is that SXP will rise to $5.6 by next week (May 15), provided Bitcoin maintains a range between $54k to $59k.

However, if Bitcoin dumps below that range it will greatly affect the price SXP. For example, point D is an evidence of how a fall in Bitcoin price can affected SXP.

So if Bitcoin falls to $46k within a week's time, SXP will fall to the support level at $2.8.

Final Words

Crypto Margin trading and Leveraged Tokens trading can help you make massive profits from crypto. They both involve trading with borrowed funds.

However, they are high risk investments and you can lose you investment very easily. So it is important to have plans and strategies before engaging in this type of trading.

We have also learnt that different crypto exchanges have various rates for crypto Margin trading and Leveraged Tokens trading, but it is safer to select low rates when engaging in these types of trades.

Conclusively, we learnt how to make a week's prediction of a selected cryptocurrency using technical analysis. Professor @stream4u's class has been very insightful as usual.