Bitcoin Leverage Trading in the UAE
Investors and journalists compare today's fashion for investing in cryptocurrencies (such as Bitcoin) to the American gold rush of the mid-19th century. Others compared the mania for digital currency to the Dutch fascination with tulips in the 18th century.
Time will tell how long Bitcoin and similar digital currencies will last, whether they will become the new gold standard or fade into oblivion like the tulip craze in Holland.
However, while some are guessing, others make money thanks to Bitcoin leverage trading. So let's find out what is Bitcoin leverage trading?
What is leverage?
Financial leverage (leverage) is the ratio of a trader's money to the total amount of money they trade. In legal terms, Bitcoin trading with leverage is a brokerage service that provides funds several times larger than the trader's own. As a result, leverage allows you to earn more income.
The term "leverage" is rather complicated to understand, so let's look into it in detail.
Leverage allows a trader (i.e. a private investor) to make trades worth much more than their account equity.
Here is an example. You are a novice investor and decide that you can't spend more than $1,000 on stock market transactions. But suddenly, you discover a pretty good strategy and need $10,000 to trade a portfolio of securities. So you borrow the missing money from your broker - you get 1:10 leverage. The broker is obliged to protect capital. In the automated trading system, he sets the threshold for loss on a trade equal to your deposit / the amount of your account - $1000.
That is, if during operations on the stock market you suddenly incur losses, they will never exceed $1000 - you will lose your money, while the broker, without risking anything, will return yours. Fair enough. This situation is called a margin call - a losing position that threatens you with a loss is closed (sometimes even without prior notice).
And if transactions in the market are profitable, all profits are left to you, while the broker gets back only his credit funds.
Let's say you bought $20,000 worth of shares, they spiked, and you made a $4,000 profit. All $4,000 (+$1,000 deposit) is yours. The broker will take his $19,000.
Operating with your $1,000, you would never be able to make a $4,000 profit. That's the main point of margin trading.
Be careful: the margin call is not just about the collateral, but about the entire amount of your account, which is what you are risking, just that in our example, these amounts are equal.
Features of margin trading
As you have already realised, margin trading in the UAE is another form of trading. Margin trading involves trading assets such as Bitcoin and relies on borrowed funds to take tremendous advantage of future price movements of the underlying asset.
Because margin accounts allow users to borrow funds from third parties, these users can win or lose much more significant amounts of initial capital through leverage. Borrowed funds are secured by other traders who receive interest, calculated based on market demand for margin funds.
So what are some of the features of margin trading?
- If you make a margin trade on a Bitcoin leverage trading platform, the interest rate applied to each trade is a potential disadvantage. Costs may increase when you consider that the margin level must be increased (or leverage decreased). This is known as a margin call. The higher the ratio, the faster the margin level can increase.
- However, if margin trading is booming, high leverage ratios can help traders quickly make large gains. For example, trading with 2x to 10x leverage can increase the amount of profit on an initial investment by nearly two or ten times, respectively.
- Probably the more responsible use of margin is a good tool for hedging portfolio investments. Diversifying a portfolio through a hedged position can protect against significant market declines.
- To protect against significant losses, margin trading on a Bitcoin leverage trading platform should always be done using tools such as stop-limit orders.
- Volatility is a crucial feature for the cryptocurrency market, with bitcoin trading with leverage only enhanced by leverage. But it also makes small investments riskier from a cost perspective, but it also gives more chances to earn more.
Ways of Bitcoin leverage trading in the UAE
When trading with leverage, the first thing you need to know is that leverage comes in different forms. Its size does not depend on the wishes of the broker but each particular financial instrument and its liquidity. So, if you work with several assets on a Bitcoin trading platform with leverage, you need to keep in mind that the conditions may be different.
So, if you are going to do bitcoin leverage trading, you have several options for dealing with a broker:
- The simple option: buy cheap, sell expensive. You have analysed the market and seen a profitable strategy that should prove beneficial. You give the broker, i.e. Bitcoin leverage trading platform, a deposit and ask for leverage for bitcoin trading. After the transaction, you make a profit/loss and settle with the broker.
- Another option of Bitcoin leverage trading in the UAE, is more complicated. You believe that the bitcoin price should fall, and you want to profit from falling quotations (this is not a strategy for beginners). To do that, you have to sell the shares. But you don't have any at all. You take the cryptocurrency from a broker, sell them at the current rate, and then, after a fall on the downside, you buy it cheaper and return it to the broker and take your profit.
Thus, you can trade with leverage in any strategy. To calculate the leverage for each security and asset, it is better to use automated trading systems such as the Bitcoin trading platform with leverage IQ Option.
How to minimize risk in margin trading in the UAE?
When trading with leverage, is it essential to minimize risk? There are two basic ways to do so:
- Regardless of the investor's experience, it is always worth setting a so-called stop loss. This is the value at which a trade should be closed, i.e. actually an "order" to the trading system to lock in profit/loss when the asset or instrument being traded has reached a predetermined price level. A stop-loss protects the trader from significant losses (loss of all funds in the account).
- Do not open trades with large deposits (for example, for the entire account) - allocate funds rationally according to your chosen strategy. Trade cautiously and assess the risks. And even more so, don't try to develop fraudulent schemes using financial leverage - you will incur enormous losses.
How to Start Trading Bitcoins with Leverage?
To start trading, you need to register on the platform. The platform is straightforward to use and, most importantly, safe and secure. Therefore, registration is a quick and easy process that every user should go through.
To deposit funds into an account, the Client must apply in his personal profile. To make the request, he should select a payment method from the list, fill in the required fields and proceed to the payment page.
The processing time depends on the selected payment method and may vary. The company does not influence this. In the case of electronic payments, the transaction can be processed from a few seconds to several days. In the case of a direct bank transfer, the payment can take up to 45 working days to be processed.
Is it safe to trade online?
Trading on the stock exchange is one way of actively investing. When you don't just buy a bundle of shares and wait for regular profits, but make money from fluctuating exchange rates.
Conventionally, this can be compared to a traditional trading business. Buy higher, sell lower. Or vice versa.
Real trading is a profession, like any other. To avoid losing investments, and in the long term, to increase them, you will need to learn the strategies, study the behaviour of currencies and other assets, and act strictly according to your plan.
Do not confuse stock trading and gambling. People with a passion for gambling are strictly not recommended to work in trading. There is a 99% chance that gambling and emotionality will lead to losing all funds.
Remember: There is no one strategy, no magic trading robot that you can turn on and count the profits.
Thanks to trading, you don't have to travel to the office, you don't have to work to a precise schedule. You can trade at home, in the park, on vacation - as long as you have a stable Internet connection. No one is in charge. No one stands over you. No one gives you tasks. No one finds you or monitors your work.
So it would help if you took the time to learn how to trade competently. Then you can take it to the next level. Success to you!