Dynamic Leverage Explained
Leveraged Bitcoin and Crypto Trading
Trading Bitcoin and other cryptocurrencies with leverage allows you to trade a much larger position size than your deposit amount would allow. And of course, trading larger position sizes returns a higher end profit (or loss!).
For example, if you want to trade 1 lot Bitcoin with no leverage, you will need 1 Bitcoin as margin, which is currently around 22,000 USD. Considering the average retail trader will want to deposit between $500 and $10,000 initially, a 22k margin requirement is simply too high.
This is where leverage comes into play. If you trade with 1:20 leverage, you will need 20 times less than this, so you would only require 1,100 USD. Suddenly the margin requirement becomes much more manageable.
AltumBrokers offers the market’s highest leverage for cryptocurrency trading, which is 1:500. However, this doesn’t mean you can trade 10 Bitcoins with only $440, wishful thinking, right?
Trading Cryptos With High Leverage
Trading such volumes with high leverage on volatile markets like cryptocurrencies would likely spell disaster for traders and wipe out accounts almost instantly (see our article on stop out). This is why AltumBrokers uses a dynamic leverage model.
A dynamic leverage model means that there are restrictions on the volumes that can be traded with the maximum leverage.
The dynamic leverage model used by AltumBrokers allows traders to trade a maximum of 10,000 USD value with 1:500 leverage.
Where the trade volume higher than this, the leverage will be restricted, as per the below table:
Maximum Leverage Per Volume Traded
|
Tiers
|
Volume USD
|
Max Leverage
|
Margin Requirement %
|
|---|---|---|---|
|
Tier 1
|
0 - 10,000
|
1:500
|
0.2
|
|
Tier 2
|
10,000 – 50,000
|
1:200
|
0.5
|
|
Tier 3
|
50,000 – 100,000
|
1:100
|
1
|
|
Tier 4
|
100,000 – 200,000
|
1:50
|
2
|
|
Tier 5
|
200,000 – 1,000,000
|
1:20
|
5
|
Margin Requirements Using Dynamic Leverage
Here’s an example of the total margin requirement for 1 lot Bitcoin:
Current BTC price = 22,000 USD.
You can trade 10,000 USD out of the 22,000 with 1:500 leverage (20 USD Margin Requirement)
The next 10,000 USD you can trade with 1:200 leverage. (50 USD Margin Requirement)
The remaining 2,000 USD you can trade with 1:100 leverage. (20 USD Margin Requirement).
This brings the total margin requirement for 1 lot BTC to 90 USD.
This 90 USD would automatically be converted into the base currency of your MT5 trading account as follows:
Margin Requirements for 1 Lot Bitcoin
|
MT5 Account Base Currency
|
Trading Price (USD)
|
Margin Requirement for 1 lot Bitcoin
|
|---|---|---|
|
Bitcoin (BTC)
|
22,000 USD
|
0.00409 BTC
|
|
Ethereum (ETH)
|
1,716 USD
|
0.052 ETH
|
|
Tether (USDT)
|
1
|
90 USDT
|
|
Litecoin (LTC)
|
62 USD
|
1.45 LTC
|
|
Cardano (ADA)
|
0.5 USD
|
180 ADA
|
|
BitcoinCash (BCH)
|
128 USD
|
0.7 BCH
|
|
Ripple (XRP)
|
0.35 USD
|
257 XRP
|
The above example is to illustrate how the dynamic leverage works only; the actual margin requirements will depend on the market price at the moment you open the trade. This article was last updated using September 2022 prices.
The dynamic leverage model is applied to the account as a whole, and not per trade. This means that the accounts total exposed volume is considered when calculating the leverage and margin requirements.
For example, if you have 5 trades open of 1 Bitcoin each, this is considered a total volume of 5 Bitcoin (110,000 USD) and the total requirement margin would be:
10,000 USD @ 1:500 = 20 USD
10,000 USD @ 1: 200 = 50 USD
50,000 USD @ 1:100 = 500 USD
40,000 USD @ 1:50 = 2,000 USD
The remaining 130,000 USD @ 1:20 USD = 800 USD
Total Margin Requirement = 3,370 USD
Since only 3,370 USD is required out of the total 110,000, this would give an overall account leverage of 1:33.
Our Leverage Margin Calculator can easily calculate for you your overall account leverage depending on the volumes you have open.
For more interesting tips and facts visit our Education Centre.
