How to trade with leverage on Binance

Understanding Leverage in Cryptocurrency Trading

Leverage in cryptocurrency trading allows users to borrow funds to increase their trading position beyond what would be possible with their own capital alone. On Binance, this is primarily available through the Binance Futures platform. When you trade with leverage, you open a position that is a multiple of your initial margin. For example, using 5x leverage means you control a position five times larger than your deposited margin. Higher leverage, such as 50x or 125x, is available for certain pairs like BTC/USDT, but it increases both potential profits and risks. It's essential to understand that leverage amplifies losses just as much as gains. The borrowed amount is provided by Binance or other traders through its peer-to-peer funding system in the futures market.

Setting Up a Binance Futures Account

Before trading with leverage, you must access the Binance Futures environment. Navigate to the Binance website and log in to your account. In the top menu, locate and click on 'Derivatives', then select 'USDⓈ-M Futures' (or 'COIN-M Futures' if trading against crypto collateral). The first time you enter, you'll be prompted to create a futures account. Confirm your identity if required and agree to the terms. Once activated, your futures wallet will be separate from your spot wallet. You can transfer funds between wallets using the 'Transfer' button. Ensure you deposit sufficient funds—typically USDT or another supported stablecoin—into your futures wallet to serve as margin. This margin supports your leveraged positions and helps avoid liquidation.

Choosing the Right Leverage and Trading Pair

After funding your futures wallet, select a trading pair such as BTC/USDT or ETH/USDT. At the top of the trading interface, you’ll see a leverage selector, usually set at 20x by default. Click on it to adjust. You can choose leverage ranging from 1x to 125x, depending on the asset. Higher leverage reduces the margin required but increases the risk of liquidation. Consider your risk tolerance and strategy before selecting. For instance, conservative traders may prefer 5x to 10x, while experienced traders might use higher multiples for short-term scalping. Always check the liquidation price displayed on the interface, which shows the price at which your position will be automatically closed if the market moves against you.

Opening a Leveraged Position

To open a leveraged long or short position:

• Choose 'Isolated' or 'Cross' margin mode. Isolated margin limits risk to the allocated margin for that trade. Cross margin uses the entire futures wallet balance, potentially reducing liquidation risk but exposing more funds.
• Enter the amount you wish to trade. The system calculates the required margin based on your selected leverage.
• Select 'Buy/Long' if you expect the price to rise, or 'Sell/Short' if you anticipate a drop.
• Choose an order type: Market Order executes immediately at the current price, while Limit Order lets you set a specific entry price.
• Review the estimated liquidation price, leverage, and position size before confirming.
• Click 'Buy' or 'Sell' to open the position. Once opened, the position appears in the 'Positions' tab, where you can monitor unrealized P&L and adjust stop-loss or take-profit levels.

  Managing Risk and Closing Positions

  Risk management is critical when trading with leverage. Use stop-loss orders to limit potential losses. In the 'Orders' section, set a stop-loss price that, when reached, will automatically close the position. Similarly, take-profit orders lock in gains at a predetermined level. Monitor your maintenance margin—the minimum equity required to keep the position open. If your equity falls below this due to adverse price movement, liquidation occurs. You can reduce leverage or add more margin to avoid this. To close a position manually:
• Go to the 'Positions' tab.
• Locate your open position.
• Enter the amount you want to close (you can partially close).
• Click 'Close' or set a closing order.The realized profit or loss will be credited to your futures wallet immediately.

  Understanding Funding Rates and Fees

  When holding leveraged positions in perpetual futures contracts on Binance, funding fees apply every 8 hours. These fees compensate the funding rate mechanism that aligns the futures price with the spot price. The rate can be positive or negative, meaning you either pay or receive funds. Check the funding rate clock on the trading interface to anticipate when fees are charged. Fees are calculated based on your position size and the current rate. Additionally, Binance charges trading fees for opening and closing positions. These vary based on your 30-day trading volume and whether you are a maker (providing liquidity) or taker (removing liquidity). Always factor in these costs when calculating potential returns.

  Frequently Asked Questions

  Can I change leverage after opening a position? Yes, you can adjust leverage for an open position. Click on the leverage display in the 'Positions' tab, enter the new leverage value, and confirm. This changes the margin allocation and updates the liquidation price accordingly.

  What happens if my position gets liquidated?Upon liquidation, Binance automatically closes your position to prevent further losses. A portion of your margin may be used to cover losses, and in extreme cases, an insurance clearance fee may apply. You retain any remaining balance after the liquidation process.

  Is isolated or cross margin better for beginners?Isolated margin is generally safer for beginners because it limits risk to the specific margin assigned to a single trade. Cross margin spreads risk across the entire wallet, which can lead to larger losses if multiple positions move against you.

  How do I transfer funds from my spot wallet to futures?Click the 'Wallet' dropdown in the top navigation, select 'Transfer', choose 'Spot' to 'Futures', enter the amount, select the coin (e.g., USDT), and confirm. The transfer is typically instant.