How do leverage positions work?

Open leverage positions

The importance of properly setting up a position

Opening a position on leverage trading platforms is easy but at the same time demanding to know the markets. This is the most important step to becoming a trader who doesn’t fear the volatility of the markets. Learning how to open and set-up good positions on leverage platforms is important. It is not enough to know where the markets will go and to just put short or long positions. There is more to opening a position on leverage platforms like PrimeXBT, Bitmex, ByBit or Deribit.

There is more to opening a position?

If you want to open a position first you need to choose the order type. There different order types – Market/Limit/Stop and OCO. Knowing which one to choose is very important as this will dictate your strategy. Therefore if you want to have proper control over your margin and open positions you need to know the orders. Besides knowing the orders you also need to know how to read a few indicators. In this article, we will cover how positions and the order types work.

Order types

Usually, the most used orders types are Market and Limit. The more advanced orders like OCO (one-cancels-the-other) are used by more advanced traders with a little bit more experience. For beginners, it is very important to understand the market and limit orders as they may play a very important role in your profit from your positions.

Market Order

You buy at the current price of the asset that you want to open a position. For example, if you open a position right now at that current price you will use a market order.

Limit Order

You set a price at a certain price target that when reached will open a short or long position. For example, if the current price of Bitcoin is 10560$ and you want to enter a long position but know that the price may fall down to 10350$ you set a buy order for 10375$ per BTC. When the price is reached you will automatically enter a long position.

PrimeXBT order tab position

Are there differences between positions on the leverage platforms?

It all depends on the technical design of the platform and how the leverage and the margin work. Therefore each platform is better for different strategies and traders. A noticeable difference is how leverage and positions are designed on Bitmex and PrimeXBT.

On Bitmex every position is independent of the other positions and work in an isolated margin. Which is good if you want to operate on limited risk, being protected from losing all of your capital in one trade. Because as you know because of the high volatility of this space, the risk is much higher than in the traditional markets.

While on PrimeXBT when you open a position you are using all of your capital in the trading account to provide liquidity. Your whole margin/capital is used for all of the open positions.

Why this difference is important for open positions with leverage

The importance lies in that both leverage designs can be used for different types of trading. This is why people say that the market is big enough for many players. Therefore in this way, when you have competitors you also have innovators, just like in the case of Prime. Of course, on both platforms, you can always add liquidity to the position. The question is which method would you prefer to use. The one where you have an isolated position or the one where you have unified positions.

Keeping a position open needs a few more things to be adjusted so you are not easily liquidated. With 100x leverage, the liquidation level is very close and without a proper stop loss and take profit adjusted your odds will be against you.

Bitmex open position

In some cases, if the market turns the other way around but all of the indicators point to the other side and we want to maintain the position longer we need to add more margin to a position. Sometimes in the crypto market, a sudden flash crash happens and having sufficient liquidity and reaction to add to it may save you a lot of capital. If you are using Bitmex you need to follow closely what is going on the market and act on time. On PrimeXBT if you use no more than 10% from your margin you have nothing to worry about in flash crashes because the liquidity is already there. Two different systems for different approaches to keeping a position open for longer.

Good leverage position management – yield results

Knowing how to manage positions sufficiently can lead you to profits while not falling prey to the volatile market. Of course, you need to keep your emotions in order so you don’t panic close a position and in the next few minutes, the market goes back on track. In this example, if you keep your emotions strong and don’t act based on them you would have ended in profit or at least at the starting point. If you fall prey to your emotions and close a position you will end up losing money.

Learning to properly manage a position, especially when trading with high leverage is crucial. It can be the difference between success or failure, of course, this is only one part of the whole equation as there is more. Learning how to read charts and indicators is very important as you must know when to open a position. After that, you need to manage it with a tight stop loss and take profit set accordingly to your strategy. Before starting to trade you need to build up a simple strategy if you are a beginner and learn how to calculate profit correctly on which you can read here.

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