Leverage

Mostly yes, there is also a lending fee with exchanges like Polo. If your position drops low enough that you basically can't afford it anymore your position will automatically be liquidated (closed). For that reason it's a good idea to not use all of your margin all of the time unless you know what you're doing. Just putting it out there that 5x on Kraken can be dangerous to play around with, also Kraken's trading interface for using leverage is dog shit.

how does it feel being such an insecure brainlet?
yes you stupid fuck

So what would you recommend using if I put in 4k? 2-3?

We have a tough guy, lads

Don't get into leveraged trading game like shorting unless you have the heart to absorb losses. Nine out of ten lose money. It better to buy and in the short term basis your capacity. Rest up to you...

leverage is borrowed money.

be it either from a bank, exchange, friend or other financial resource, it's the idea of borrowing money so you can trade more and make higher returns. However it is shady as what you're doing is putting yourself in debt to bet on predictions.

The aim is to return profits faster than the interest on the loan accrues so you pay off your loan quickly and pay fuck all in interest and basically end up with free money left over.

Does anyone have the Reddit post relating to this shit from 4 or 5 years ago? The one where a guy took out a 300K ish loan, 190K to pay his house and the remaining money he put into Bitcoin. People called him a fuckin idiot. Joke's on them.

Yeah but how do they collect on a crypto debt? Do you have to give them your ID?

So here is another stupid question:
The exchange automatically liquidates your position when your losses are too high, right? When and how does that happen? If you lose more money than you originally had before borrowing?

They just close the position and deduct all funds from your balance it happened to me when ETH crashed a couple months ago

Yeah but what if your losses are more than your total wallet balance? The exchange just takes the hit?

You can't accrue more debt than you have spent.
If you pay up $1000 at leverage 5, as soon as you make $1000 in losses your position is closed.
The highest amount you can lose is the one you invested at the start, you can't get into millions of debt or anything like that.

if you're too dumb to understand leverage then you're too dumb to be using leverage

if you can't be bothered to DYOR you're gonna lose your shit messing with leverage/margin

BitMEX has a testnet.

Well, obviously I won't do anything with it until I'm sure I understand it well enough. That's why I'm asking in the first place.

2x leverage means that for every dollar you invest you're borrowing 1 dollar from someone else to also invest. This means you are investing with 50% of your money and 50% of someone elses.

If your investment goes up 10%, you get the 10% on your 1000 invested and the 10% from the borrowed money invested, for 200 dollars earned or 20% total.

If it drops 10%, you lose 10% on your 1000 invested and 10% on the 1000 you borrowed. but you still owe 1000 regardless, so you need to pay another 100 out to right the loss on your borrowing and thus are now down 20%.

Its a force multiplier. If you lever big, you win big and lose big. If you lose big while highly levered you will get margin called and lose the shirt off your back.

They don't let that happen. Once your margin reaches your initial money it will close. Unless you have a different deal with them and "you are good for it". Which, motherfucker, you are not.

okay I'm on the verge of understanding, just need a simple answer, thanks anons.

>have 1000 in wallet
>invest it all at leverage 5
>must lose only 200 of initial investment for entire position to be closed
>must gain only 200 to 5x initial investment

correct?

No, you must lose 20% for it to be closed.
You spent 1000 on leverage 5, so your position is worth 5000.
20% of 5000 is 1000.
When you lose 1000 your position is closed.

You only trade crypto on leverage you dummie, unless you are a cuck or something.

T. 10k gains with 500 bucks in 2 months

Ookay, so once you leverage your 1000, you OWN 5000

No, you only own the movements on it.
It's a loan.
If the stack grows 10%, the stack will be worth 5500
But you have 4000 to give back, so all you own is the 500 (Plus your initial 1000)

As I understand it, you don't own it, you only loan it. But get to keep whatever % it rises (or loses). But obviously you don't get to keep the loan, you just keep the profit or lost.

check out the youtube video about kraken margin trading so you dont fuck up

also their site is super laggy so it will take like 1-2 minutes to open the position if you're lucky, and even then it might not show up on the ui

also you'll lose most of your money

Will do, thanks.

Well couldn't it be somewhat mitigated by automatically selling at price X? So you can set your own boundaries as to what you are willing to lose. And until now bitcoin has always went up, even though there are dips it has always recovered and went to new highs. So if you are trading in bitcoins, you can count that it will always bounce upwards, how can you even lose money this way if you never sell?

unless it drops so much that it liquidates you before bouncing up. you can set up automatic sells/buys like that but i wouldnt count on kraken api to execute in time, you'd probably lose more. it took 20 minutes to close a position for me once

Are other exchanges more reliable with automatic executions or is it just kraken that has problems?

I've only used bitfinex for that, and it's smooth, but i from what i hear it's only kraken that has these problems