Shorting a cryptocurrency is basically betting against the cryptocurrency and lots of brokers started to offer this option. Some brokers offer a wide range of digital coins with up to 50:1 leverage, zero commission, and 24/7 trading. Leverage is a loan that is provided to the trader by the broker and the amount of leverage provided is depending on the broker and the size of the position that the investor is trading. Traders use leverage to increase the returns that can be provided on an investment. Traders/investors have to join a platform that allows margin trading and they should keep in mind that trading with leverage can generate much larger losses than traditional trading. It’s not a good idea to hold a short position for long periods of time or to leave an open short position with no stop-loss order. I would recommend everybody to use risk management techniques to limit losses for this type of trading with cryptocurrencies.
When we are talking about trading with leverage, a 20:1 leverage ratio means that the minimum margin requirement for the trader is 1/20 = 5%. This means that the trader is required to have at least 1/20 = 5% of the total amount of trade available as cash in the trading account. A 3:1 leverage ratio means that the minimum margin requirement for the trader is 1/3 = 33%, so trader is required to have at least 33% of the total amount of trade available as cash in the trading account. For example, to trade $10,000 of cryptocurrency, with a margin of 5%, the trader will only have to deposit $500 into his margin account. The leverage in the trade like this is 20:1.
Leverage comparison of brokers
When we talking about leverage comparison of brokers, some brokers offer a wide range of digital coins with up to 50:1 leverage but most of them offer leverage from 3:1 to 30:1. Plus500 offers 30:1, AvaTrade offers 20:1, FxOpen offers 3:1, Fortrade offers 5:1, Alpari offers 10:1, Admiral Markets offers 5:1. It is a very important to find the right broker that offer margin trading and have great liquidity. There are only a handful of cryptocurrency exchanges that allow shorting and have good liquidity. The major difference between brokers and cryptocurrency exchanges is that with brokers you are actually trading a CFD(Contract For Difference), most of the time. On the cryptocurrency exchanges, traders and investors can really buy or sell cryptocurrencies. The ability to earn big profits by using leverage is substantial but losses can also be very big and traders should always have this in mind. Before starting to trade with leverage traders should find the profitable trading strategy with short and long-term goals. My recommendation for all cryptocurrency traders who want to trade with leverage is once you are comfortable with a particular trading strategy, remain faithful to that trading strategy and always use “stop loss” and “take profit” orders.