Difference between MEXC leverage and contract

Understanding the distinctions between MEXC leverage and contract trading is essential for savvy traders seeking to leverage their trading potential while managing risk effectively.

Nov 12, 2024 at 11:06 am

Understanding the Difference between MEXC Leverage and Contract

MEXC offers a comprehensive suite of trading options, including leverage and contract trading. While both leverage and contract trading allow traders to multiply their potential profits, they differ in several key aspects. Understanding these differences is crucial for traders to make informed trading decisions.

MEXC Leverage Trading

MEXC leverage trading allows traders to borrow funds from the exchange to increase their trading positions. This enables them to trade with a larger amount of capital than they actually have, potentially amplifying their profits.

How does MEXC Leverage Trading Work?

1. Select Trading Pair and Leverage Ratio: Traders choose the trading pair they want to trade and specify the desired leverage ratio. For instance, a leverage ratio of 10x means the trader can borrow up to nine times their account balance.
2. Place a Trading Order: With leverage activated, traders place a trading order as they would with a regular spot order. The order size is multiplied by the leverage ratio.
3. Profit or Loss Magnification: Leveraged trading magnifies both profits and losses. If the market moves in the trader's favor, they amplify their gains accordingly. However, if the market moves against them, losses can be magnified, leading to significant capital loss.

MEXC Contract Trading

MEXC contract trading involves trading standardized contracts that represent the price of underlying assets like cryptocurrencies or commodities. These contracts have a specified expiry date and can be traded at leveraged or unleveraged levels.

How does MEXC Contract Trading Work?

1. Choose Contract and Leverage: Traders select the contract they want to trade (e.g., BTC perpetual contract) and specify the leverage (if desired).
2. Set Margin and Position Size: Traders allocate a certain amount of their account balance as margin for potential losses. The position size, determined by the margin and leverage, represents the contract's underlying value.
3. Open or Close a Contract: Traders open a long position if they anticipate the asset price to rise and close it with a profit when the price reaches their target. Conversely, they open a short position if they expect the price to fall.

Key Differences between MEXC Leverage and Contract

1. Asset Ownership:

• Leverage Trading: Traders do not own the underlying asset; they merely borrow funds to amplify their position.
• Contract Trading: Traders own the contract, representing their claim on the underlying asset.

2. Expiry Date:

• Leverage Trading: No expiry date; traders can hold their positions indefinitely.
• Contract Trading: Contracts have a specified expiry date; positions must be closed or rolled over.

3. Margin and Risk:

• Leverage Trading: Lower margin requirements but higher risk of liquidation.
• Contract Trading: Higher margin requirements but lower risk of liquidation.

4. Profit and Loss Mechanism:

• Leverage Trading: Prof