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Before understanding what Bitcoin leverage is, the editor of Bitcoin Circle wants to talk to you about Bitcoin leverage. In fact, Bitcoin leverage is a kind of financial derivatives. Just like traditional financial derivatives, Bitcoin leverage In fact, it is a multiplier sign, a tool that can amplify the results of investment. The result of our investment, whether it is gain or loss, will be increased by the multiple of our leverage. Bitcoin leverage is a concept that we will come into contact with when using Bitcoin leverage tools. However, if you don’t understand what Bitcoin leverage is, let the editor of Bitcoin Circle introduce this Bitcoin to you. Leverage multiple.

## What is the leverage ratio of Bitcoin?

The reason why futures contract trading is risky is that "leverage" can be used in it. Leveraged trading can not only magnify your profits, but also magnify your losses. For example, if you use 10 times leverage, if you make a profit, your profits will be the same as before. 10 times the original basis. On the contrary, if a loss occurs, the loss will also be 10 times the original basis.

Assume that the price of XX coin is 100 yuan. There are two people, Zhang San and Li Si. Zhang San is bullish and Li Si is bearish. They both go to a trading platform to conduct futures transactions according to their own opinions. Zhang San uses 100 yuan as principal (margin). When opening a long position (buying up) in futures on a certain trading platform, Li Si also uses 100 yuan as the principal and chooses to buy down. Assume that Zhang San and Li Si both use 10 times leverage!

After two people bought it, the XX coin fell to 90 yuan each, which means it dropped 10%. If we conduct spot trading, the loss is 10%, which means that the 100 yuan lost 10 yuan, leaving 90 yuan! But both Zhang San and Li Si were leveraged 10 times, which means that their losses or profits were magnified 10 times on the original basis!

At this time, the income of the two people is: Zhang San lost 100 yuan, loss 10% * 10 times leverage = loss 100%, that is, 100 yuan! And Li Si chose to buy down, which means that he bought the right thing. The profit is profit of 100 yuan, profit of 10% * 10 times leverage = profit of 100%. The result is that Zhang San lost all his principal of 100 yuan, while Li Si took 100 yuan and earned 100 yuan, and his principal became 200 yuan!

This is only 10 times leverage. If it is 100 times leverage, as long as the XX coin falls to 99 yuan, Zhang San's loss will reach 100%. If it falls by 1 yuan, he will lose 1%. 1% * 100 times leverage = 100!

## How to calculate Bitcoin leverage ratio?

Actual leverage ratio = (position margin * contract multiple) / total amount of funds

Assume that your account has 10,000 yuan, use this formula to deduce what 3 times leverage is

3000 (margin) * 10 (contract multiple) / 10000 (account funds) = 3 (actual leverage multiple)

In more understandable terms, the position value is 3 times the account amount.

The margin is 3,000 yuan and the contract multiple is 10 times. The value of the position you established at this time is 30,000 yuan.

But your principal is 10,000 yuan, that is, your position is 3 times the principal. This situation is called 3 times leverage.

The above content is the editor’s introduction to Bitcoin’s leverage ratio. The risk of Bitcoin leverage trading is still very high, especially when our Bitcoin leverage ratio is relatively high. When using high leverage, you must set a stop loss close to the opening price. In many cases, leverage is just a kind of trading noise. High leverage is relatively high when it is used in breakthroughs and some extreme oversold conditions. Everyone must not blindly choose the endorsement of Bitcoin leverage, especially for novices in the currency circle, who may not necessarily be able to bear this risk when faced with high-risk operations such as leverage trading.