Market fads like Flash loans, Yield-farming, or gem-hunting on Uniswap can offer great opportunities for investors, but often these trends burst as quickly as they emerge. Margin trading has only grown in the legacy-financial market for decades, and there is no reason the same interest shouldn't also reflect in the crypto market.
Coinrule's new product launch, Steroid Leverage, will make powerful trading tools available to every trader with unparalleled user-experience.
Among the latest game-changing trading trends of the crypto world, the rise of Margin, Derivatives and Leverage trading has a spot on the podium. Leverage products allow traders to bet on the future price of a coin and earn, regardless if the price is up or down. New trading venues like Deribit and FTX emerged, and long-established exchanges like Binance and Kraken have added derivatives trading to their product offering.
With the launch of Coinrule’s Automated Leverage Trading “Steroid Leverage” any trader can pre-plan their leverage trades automatically from a simple interface. Trading with leverage allows traders to exploit immense opportunities to grow capital exponentially - 1,000x and more - but also comes with challenges, especially for hobby traders.
What is Steroid Leverage Trading?
Understanding how leverage works is the first step to achieve the 1,000x returns that every crypto trader is aiming for.
Starting from the assumption that a trader has $1,000 to invest, and he buys the equivalent value of Bitcoin, the return on the investment will be the percentage change of Bitcoin' price multiplied by the amount invested. In ‘normal’ trading, if Bitcoin moves 1% up, the return will be 1% of $1,000, equal to $10. Now, what if the trader wants to 100x this price growth?
The trader can open a leveraged position on Bitcoin, borrowing funds against collateral (the so-called ‘margin’) to buy more Bitcoin. Let’s assume that the trading platform that the trader uses allows leverage of up to 100x. The degree of leverage is determined by the amount of margin used as collateral for opening the position. 1% of margin corresponds to a leverage effect of 100x, as 1 divided by 1% equals 100. Assuming that the trader invests his full available capital and uses the maximum allowed leverage, he would buy an equivalent of $100,000 of Bitcoin. Returning to the scenario in which the price moves up by 1%, the return for the trader would be $1,000. The yield on the investment would be 1% multiplied by 100x, equal to 100% on the investment.
Of course the possibility to increase profits by 100x catches the interest of any trader. The downside of course is that the trader takes on much faster and higher risk on his position. To successfully manage this risk and catch the opportunities that present themselves, traders need access to automated trading tools.
Here comes Coinrule’s Steroid Leverage (SL). Managing leveraged positions requires constant monitoring of the market conditions to make sure that the system promptly secures profits and cuts losses. The SL smart-assistant allows creating advanced strategies like:
"If Bitcoin Future drops 2%, buy, then if the price increases 2% or decreases 2% from the entry, sell." It takes just a few clicks across a user-optimized interface to launch the strategy and have it running 24/7”
Another great opportunity is to open and close positions on a very short time horizon, profiting from small price changes. Traders call this scalping. Derivatives exchanges charge on average low transaction fees, making scalp trades more profitable.
“Buying and selling with a 0.5% margin of profit and repeating the trade over and over again can return exceptional opportunities.”
How Traders Benefit From Steroid Leverage
The most obvious (and risky!) answer is increasing your returns with the same amount of capital invested. But there are other, even more valuable reasons for using leverage and trading derivatives to add long-term value to your trading.
Short-term Price Speculation
When trading with leverage, it is extremely easy to take positions that allow you to benefit from price upsides and downsides. You can make money no matter if prices go up or down. Swing trading strategies become incredibly profitable when the trader can take advantage of each wave.
The trader can profit from the price drop of a coin by ‘short selling’ the derivative contract, without the need of holding the underlying asset. That allows a much faster reaction to the ever-evolving conditions of the crypto markets and lets traders catch opportunities faster than ever.
Superior Market Liquidity
When trading cryptocurrencies, getting in or out from a trade can be expensive because low liquidity can drive up the price. That translates directly into a cut of a trader’s profits.
Leveraged trading encourages traders to increase the sizes of their orders, leading to larger liquidity in the order book. That creates the perfect conditions for automatic bots and market makers that in turn contribute to the depth of the market with a positive feedback loop for the price.
The possibility of profiting from market downturns not only translates into purely speculative opportunities but also allows to protect your portfolio by ‘hedging’ the risk of sudden price drops.
Often, traders or investors react slowly in times of a crash, especially if they hold many coins to which they feel attached. It's indeed not easy to close many positions at the same time, both from a technical and an emotional point of view.
Yet, a single short position on a derivative instrument can massively reduce the overall downside risk in a trader’s portfolio, without the need of fire-selling the coins in the wallet.
A good example would be a trader that holds $10,000 worth of diversified crypto assets. To protect himself in times of uncertainty, he may plan to short-sell a certain amount of a BTC perpetual swaps to hedge against that risk; an inverse financial product. The profit in the derivative contract whether a drop occurs would compensate the (not yet realized) loss on the coins held.
While hedging is not yet often used by beginner traders, it’s the way how big players and institutions manage their risk and survive big crashes. Coinrule’s Steroid Leverage fills this gap, empowering every trader to have more advanced control over their assets, no matter if the markets are up or down.
Use Steroid Leverage While Managing Risk
Using a stop loss on each trade is a savvy practice that helps traders protect themselves from larger than expected losses. Especially beginner traders are not used to setting up a stop loss on each position. And even if they do, they often set it at a level that causes the position to be closed in loss, right before the coin actually starts to go into the originally desired direction.
Likely this is the most underrated risk of trading with leverage. Each leveraged position comes with a pre-set stop-loss imposed by the exchange. The intermediary has to make sure every position is closed before the loss exceeds the initial ‘margin’. Remember, trading is a sum-zero game. One's loss is someone else's profit. If a trader defaults on his position with an outsized loss, that would mean the traders that took the opposite side of the trade may not claim their profit. To avoid that, the exchange imposes a liquidation price for each position.
The price at which the exchange closes the position automatically depends on the degree of leverage selected. Of course, the lower is the leverage, the further the liquidation price will be from the current market prices.
No coin moves with linear price moves, drops and rebounds happen regularly, so a high degree of leverage means that a lot of positions can be closed in loss without any significant return. Beginner traders approaching derivative tools and margin trading for the first time should never exceed leverage of 5 to 10, considering that most of the most experienced traders rarely push themselves to positions with values above 20 to 50.
Coinrule’s Steroid Leverage lets users build automated trading strategies to protect themselves from the risks of Leverage Trading and to catch the opportunities to grow your portfolio by 1,000x.
Market opportunities arise 24/7 and reacting to them requires advanced tools and automation. With the release of Steroid Leverage, Coinrule has now given the power of automation for Leverage Trading into the hands of regular traders, raising the trading game for the whole world of finance.