Exchanges

Bybit Exchange Explained – How To Trade With Leverage

Trading with leverage is one of the essentials for traditional stock market traders and brokers. However, the same fundamentals apply to crypto trading as well. It can be hard to understand exactly how, or on what platforms, users can trade crypto with leverage. As such, this article will see the Bybit exchange explained. This means that anyone who wants to will be able to trade crypto with leverage and with ease.

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The Bybit crypto exchange explained

First and foremost, Bybit is a crypto exchange from the British Virgin Islands. This, however, is not a regular cryptocurrency exchange. Instead, Bybit is a so-called “cryptocurrency derivates exchange”. Bybit is mainly focused on the two trading pairs of BTC/USD and ETH/USD. Nevertheless, the website also features support for EOS and Ripple.

For more basic information regarding Bybit, be sure to check out Toshi Times’ Ultimate Bybit Tutorial for Crypto Derivates Trading. However, this article focuses on the specifics and consequences of trading with leverage. As such, it will see the Bybit exchange explained and leverage trading clarified,

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What is leverage trading and how do you trade with leverage?

Put simply, trading with leverage allows traders to make larger gains than the market is making. This is, essentially, done through increasing the risk taken on by the trader. Bybit offers users up to 100x in leverage. Although larger leverage means larger risk, which amplifies by a factor of 100 when trading with 100x leverage, it could nonetheless also yield larger rewards.

Although there can be very real and legitimate reasons for trading with leverage, one should note that it can lead to just as great losses as it can lead to great returns. Without further ado, let us then move onto how users can trade with leverage on Bybit.

How does leverage affect your crypto trades?

Just for the sake of clarity, leverage can be best understood using a simple calculation example. Assume that a user bets $1,000 on Bybit. If this user bets everything on Bitcoin going long, which means that the user believes Bitcoin will increase in value, this can have different effects depending on what leverage the user uses.

If the user goes long on Bitcoin with $1,000 using 100x leverage, and the price of Bitcoin increases by 10%, this leverage can dramatically increase the user’s gains. Instead of earning $100, like the user would without leverage, the user will now earn $10,000. This amounts to a whopping $9,900 more than the user would earn without leverage.

Leverage trading can be either rewarding or risky

Although this sounds all fine and dandy, it is worth noting that the opposite is also true. If the price of Bitcoin would instead decrease in value by 10%, a non-leveraged trade of $1,000 would decrease in value by $100. Nevertheless, with a leverage of 100x, this would instead mean a loss of $10,000. 

In short, leverage trading can allow traders to make significant gains in a short period of time, if they feel certain about a trade. This is something that is allowed by the Bybit exchange explained by the use of leverage. 

Leverage trading on your terms

Bybit offers users a comprehensive trading view, from which users can control their trades. What’s more, this trading view recognizes that there is no “one size fits all” trading view. As such, the Bybit exchange offers users the option to customize the trading view. 

This means that users can decide their own trading environment, in order to make it feel as comfortable as possible. However, it should be noted that US investors are currently barred from trading on Bybit.

Bybit exchange leverage trading

Moreover, this comes due to regulatory concerns in the US. Although there are many other crypto exchange alternatives for US customers, crypto derivatives trading exchanges are not as numerous. 

Nonetheless, using the Bybit exchange to trade with crypto can supercharge crypto traders gains. However, it also exposes them to more risk. Is this worth it? Well, that depends entirely on your personal risk profile and, put frankly, how much you are ready to lose. 

Is leverage trading worth it?

With that said, traders who time their trades well and who have a robust understanding of the markets can use leverage trading to their leverage – pun intended. Bybit also features a liquidation price as well, which is essentially the price at which an investor’s leveraged crypto holding can be liquidated.

In layman’s terms, the higher the leverage, the sooner crypto holdings may be liquidated – if the crypto market begins moving in the wrong direction. This is why it could be sensible to begin one’s leverage trading career with a relatively modest leverage, such as 2x or 3x, in order to first get a handle on the nature of leverage trading.

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