The leverage effect is considered positive when your gains exceed the cost of borrowing. It's negative when the cost outweighs your return. This is especially relevant in crypto, where fees, interest rates and volatility all impact your results.
Want to see how the leverage effect really works – and how to calculate it for your own trades? Read our deep dive.
Key margin requirements
Before you open a leveraged position, it’s important to understand the margin levels that keep your trade active and protect both you and the platform.
Here’s what you need to know:
Initial margin
The initial margin is the collateral that a trader must provide to open a margin position. It is often expressed as a percentage of the total value of the traded position. The initial margin serves as a guarantee to the broker that the trader has enough equity to cover potential losses. Because crypto is volatile, margin requirements are often higher than in forex but lower than in traditional stock markets.
Example: When trading stocks or securities, the initial margin might be 60% of the position’s value, while in forex trading, margin requirements can often be as low as 3% or less. In the case of cryptocurrencies, the initial margin is typically somewhere in between, depending on market volatility.
Due to leverage, the initial margin allows traders to trade larger positions while committing relatively little capital. However, the risk also increases, as losses can quickly exceed the original investment.
Maintenance margin
This is the minimum value, also called margin level. Here, your margin must maintain to keep your position open. If your trade moves against you and the margin falls below this level, you’ll face a margin call or automatic liquidation.
A margin call is a warning you receive when your margin level drops close to the liquidation threshold, which is the point where your collateral may be sold to cover losses.
Costs to consider in margin trading
When trading with leverage, it’s not just your margin that matters – there are additional costs that can impact your returns. These are the main ones to consider:
Buy fees: Charged when opening a leveraged trade.
Funding fees (or interest fees): Charged for holding a margin position open. Timing varies by platform – on Bitpanda, they accrue every 4 hours.
Liquidation fees: Applied if your position is automatically closed due to insufficient margin.
Closing fees: Taken when you manually exit a leveraged trade.
On Bitpanda, there is no buy fee when opening a position. You’ll pay a 0.3% closing fee when you close it, and a 1% fee if your position is liquidated. The funding fee is 0.03% every four hours, or 0.18% per day.
Real example of leverage in crypto trading
Let’s take a closer look at how leverage works in practice, using Bitcoin (BTC) as an example.
You deposit €1,000 and use 5x leverage, giving you control over a €5,000 BTC position.
If Bitcoin’s price goes up by 10%, your position increases in value by €500. That’s a 50% return on your original investment.
But if the price drops by 10%, you lose €500 – half your capital is gone.
That’s both the power and the risk of leverage. Your exposure grows fivefold, and so do your potential gains and losses. In fast-moving crypto markets, prices can shift quickly. That’s why managing your positions in real time is essential.
How to trade on margin with Bitpanda
Here’s a clear, step-by-step guide to help you trade on margin efficiently with Bitpanda:
Top up your funds: Before opening a leveraged position, make sure your Bitpanda account is funded.
Choose your asset: Head to the Leverage tab on the Bitpanda platform, select Margin, and pick the cryptocurrency you want to trade.
Set your leverage: Choose a leverage level that suits your risk appetite. Remember: Higher leverage means higher potential returns, but also higher risk.
Place your trade: Define the amount you want to trade and review the margin requirements shown before confirming.
Use risk management tools: Risk tools aren’t optional – they’re essential. With Bitpanda Margin Trading* you can add or reduce exposure at any time to manage your position health and avoid liquidation. Features like real-time tracking and margin alerts help you stay informed and act quickly when the market moves.
Manage your position: Easily visualise your open trades and add more collateral at any time to maintain or strengthen your position.
Monitor your trade: Regularly check how your position develops and ensure you meet all margin requirements as the market moves.
Take your strategy further with Bitpanda Margin Trading
Once you’re comfortable with the basics, Bitpanda Margin Trading* gives you everything you need to trade with precision. Use up to 10x leverage across more than 100 cryptocurrencies, monitor your positions in real time and get alerts before liquidation. With Margin Limit Orders, including Take Profit and Stop Loss, you can lock in gains and manage risks with even more precision.
