Delta Exchange: All You Need to Know About Leveraged Trading
- Delta Exchange: All You Need to Know About Leveraged Trading - January 14, 2019
Leverage trading is a term you must’ve read or come across quite a few times while trading on equity, derivatives or futures on cryptocurrencies. While leverage trading may seem to be a complex issue, if broken down it can be quite easy to understand and uncomplicated to implement and execute.
Before getting deeper into the article, it is necessary to know that you need to have a fair knowledge about trading and derivatives. Reading technical charts and understanding patterns should also be of ease to you. Leverage trading is optimized when you want to earn higher returns on your gain but it should be noted that the risks associated are also higher, just like the good ol’ saying – Higher Risks, Higher Returns.
What is Delta Exchange?
Delta exchange is a platform for individuals and budding investors to trade in futures contracts on cryptocurrencies. Delta exchange is one of its kinds with a user-friendly platform for individuals with a keen interest in derivatives, cryptocurrencies or a mix of both. Delta provides leverage as high as 100x, hence making the trades easy for you to invest in. delta allows users to go long or short based on their view on BTC Futures.
To know more about delta you can follow their website – https://www.delta.exchange/
Delta Exchange: Top Features
- High Liquidity 24X7
- 100x leveraged trading
- Currency Conversion Bar – Convert BTC to ETH/XRP/USDC
- Trading Strategies – Trade 24/7 using one of their trading strategies
- Fast, Safe & Secure APIs
- Mock Trading Platform
So what is leverage trading?
In layman’s language, leverage trading is simply borrowing money to fund your trades on the exchange. Let’s take a day to day example to make things easier:
You wish to buy a car worth $40,000 but do not have $40,000 in cash at the moment. You have $20,000 in cash and decide to borrow the other remaining half. You finance the remaining $20,000 by taking out a loan on a particular interest rate. Post that, you pay back a sum of the principal and interest payable monthly. So at this rate, even though you do not have the entire amount to fund for your car, you can still make the purchase due to the advantages of the loan.
Leverage trading is exactly the same – borrowing a sum of the amount at a particular interest rate which needs to be paid back after a decided period of time along with the principle and interest.
Now, what can go wrong with leverage trading? Going back to the car example, suppose after the purchase of the car, you take it off for a drive and get into an accident. The insurance company pays the car’s market value, which has already depreciated below what you paid for it. In other words, you have to keep paying off your car note even though you don’t have a car.
Very similar situations happen while part-taking in leverage trading. Suppose you decide to go long on a particular futures contract but due to bad economic conditions, the market goes awry and your trade is off. At this rate, you do not only lose out on your transaction and investment, but you have to pay back the amount taken on leverage plus the interest rate. While the term ‘pay back’ is being used, the real transaction of money does not happen. It is a notional amount that is borrowed just on paper, similar to futures trading on equity.
So while leverage trading can be tricky and risky, if adopted well with good strategies and stop losses, the returns can be manifold.
How does leverage trading work on Delta Exchange?
When you don’t have many coins to start with, leverage trading becomes more attractive. The Cryptocurrency market is based on the lending market, which allows anyone to borrow cryptocurrency, such as bitcoins or altcoins, from a broker, the exchange itself, or a third party. On delta exchange, traders are allowed to deposit BTC coins in their wallet, however, if they wish to transact in other futures contract, they can do so by easily converting them to their desired coin or contract on the exchange itself.
In reality, leverage trading on equity works by allowing an investor to borrow shares from their broker. On delta exchange and in the cryptocurrency world, leverage trading works by borrowing an amount from the opposite party, and to then use those funds to enter into a contract. Leverage works in the form of ratios and a 2:1 ratio means you could double your position size by borrowing twice what you actually buy.
On the delta exchange the actual exchanging of sums do not take place but just someone on the opposite side fulfilling your order. While exiting your order, you need to first pay back the sum borrowed/leveraged along with the rate of interest and then the remaining capital is for you to keep.
Let’s take an example and try to make this easier. The leverage mentioned in the exchange is 2:1 and you wish to enter a contract which requires $10,000. While you have $5000 you can still enter into this contract by borrowing the remaining $5000 due to the 2:1 ratio.
You do not need to worry about the calculations and the ratios for the leverage on delta exchange. When you pull up the counter to know the different bids and asks, all the information pertaining that transaction will be shown on your screen, with the amount of investment required, margin borrowed, interest charges.
If the trade goes in your favour, after paying off the principal amount and the interest, the profit is all for you to keep. However, if the trade goes against you, money needs to be put from your pocket to ensure that you pay back your sum borrowed.
Delta Exchange and Mock trading
And if you are still unsure about leverage trading but want to get into it, Delta provides a platform for mock trading. The mock trading platform is as good as the real-life platform, providing real-time quotes and the necessary required information. You can check out the delta exchange mock trading platform by following this link.
Ready to get into the world of futures trading on cryptocurrencies? Sign up in less than 30 seconds and start trading. Delta exchange also offers a very exciting referral program that you can use to earn a few more coins. So with the help of leverage trading and referral points, you do not even require a huge sum to start trading. Read more about Delta Exchange referral program here.