BitMEX and Leverage, two words that when most people mix, they end up losing a ton of money.
In our tutorial below, we’ll share our guide for making sure that you can be a consistent winning trader and not be one of the guys ending up on bMEX rekt.
BitMEX 100x Leverage
So let’s start with 100x leverage.
It’s a meme for most people and if you want to me to get the point, avoid 100x.
If you’re wondering why you should be avoiding 100x? Because you can’t accurately trade noise.
Noise is the minute to minute fluctuations that occur and trying to trade that is the same as going to the casino and gambling your money on red or black.
You don’t know if Jim down the street is going to sell or buy his 100 bitcoin and that 100 bitcoin can move the index price 1% causing you to get liquidated instantly.
So getting back to the main point, avoid 100x leverage, no you won’t get rich quick and no you’re not going to 100x you’re way to being a millionaire crypto whale.
Cross Leverage BitMEX
Cross leverage… the thing that most new traders should avoid, but as you become more advanced at trading you can start using.
When you open a trade using leverage, you can use isolated positions. For example, you can open a trade with $100 of equity and 10x leverage, giving you a position size of $1000.
However you can also open that same trade with cross leverage, which will utilize your entire wallet balance as equity.
So if you opened that same trade and you had $500 in your account, your liquidation price would be much further away from your entry price and it would keep the position open until it’s using your full balance in your account.
But what happens if the price were to drop 50% in a day?
You’d liquidate your entire account, BitMEX would try its best by using your full account balance to keep the position open, but if it can’t sustain the position anymore it would liquidate you.
What Leverage Should You Use?
So now we’ve gone over explaining what leverage types to avoid, here’s what leverage you should use.
From personal experience and from speaking to professional traders that have traded Bitcoin for years, they recommend using leverage in the range of 3-5X.
If you were to take a short position on Bitcoin, with a leverage of 3x, you’d have 33% of wiggle room before getting liquidated.
By using an isolated position with specific leverage amounts, you’re able to protect your entire account whilst opening trades.
So you might be thinking, ok 3-5x but will I get rich quick from using low leverage?
And the answer is… no. You won’t get rich quickly, but you can get rich quicker than trading on spot markets with no leverage at all.
If you were to open a trade at 5x leverage, you’d have 20% of wiggle room. With that trade if Bitcoin were to increase by 20%, you’d profit 100% in terms of ROE (Return on Equity).