Leverage trading allows traders to control a larger position than their account balance would allow them to on their own. This is done by borrowing money from the exchange. The amount of leverage that a trader can use varies depending on the exchange and the specific contract being traded.
Margin is the amount of money that a trader must deposit into their account in order to open a leveraged position. The margin requirement is typically expressed as a percentage of the total position value. For example, a 10% margin requirement would mean that the trader must deposit 10% of the total position value into their account in order to open the position.
For example, let's say a trader wants to open a long position on 1 BTC with 10x leverage. The current price of BTC is ₹20,00,000 (20 lakhs), so the total position value would be ₹20,00,000. With a 10% margin requirement, the trader would need to deposit ₹2,00,000 (2 lakhs) into their account in order to open the position.
If the price of BTC moves in the trader's favor, they can close their position and take a profit. However, if the price of BTC moves against the trader, their equity will be reduced. If the trader's equity falls or nears to zero their position could be liquidated.
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