Leveraged tokens are quite similar to margin trading, however, in leveraged tokens trading, there is no need for the trader to worry about collateral or liquidation, instead have a big chance of increasing profit from the leveraged cryptocurrency. Unlike margin trading, leveraged tokens trading involves ERC-20 tokens on the ethereum blockchain and also, leveraged tokens are mostly for short term trades and not for long term holding.
Simply put, leveraged tokens trading is basically a financial instrument where a crypto trader trades leveraged tokens which are ERC-20 tokens that have leveraged exposure to cryptocurrency. When it comes to leveraged tokens trading, there are two types namely; hedge also known as 1x or BULL/BEAR also known as 3x. For instance, ETHBULL is a 3x long ETH token…
What this means that every time ETH prices rises by let’s say 2%, ETHBULL rises by 3x which means ETHBULL rises 6%. One of the main benefits of leveraged tokens trading is that it will invest the profit into the underlying cryptocurrency asset automatically[.](https://steemit.com/hive-108451/@designieplay/crypto-academy-season-2-week-4-crypto-margin-trading-and-crypto-leveraged-tokens-trading-by-stream4u) This means that if a trader’s leveraged tokens position makes profit, the tokens will be put on 3x positions with that profit automatically.
[Image](https://block-builders.de/wp-content/uploads/2020/05/Binance-leveraged-tokens.png)
When it comes to leveraged tokens trading, not every crypto exchange supports leverage trading[.](https://steemit.com/hive-175254/@designieplay/about-leveraged-tokens-trading) Some of the exchanges which supports leveraged tokens trading are; Kucoin – Top crypto exchange that provides up to 10x leverage. Hedge – Hedge is a platform that Provides leveraged token trading up to 1x. Huobi – Another top crypto exchange that provides leveraged tokens up to 5x. Kraken – One of the top exchanged that provides leveraged token trading up to 5x
### Planning For Trading In Leveraged Tokens
Leveraged tokens trading involves a lot of high risk as well and thus there is a need to plan. Planning for leveraged tokens trading requires the trader to
* Have an effective trading rule and always stick to it
* Strategize and draw out a clear plan for entry and exit
* Only work with information and data from analysis and not emotions or personal bias
* Reduce risk by only using funds that are meant for high risk investments
* Should never neglect the trends as it can greatly influence the price of cryptocurrency
* Must have a very good understanding of all the different types of analysis such as fundamental analysis, technical analysis and sentimental analysis, most especially technical analysis so as to be able to make better price forecasting which is essential when it comes to crypto margin trading
* Should focus mainly on technical analysis especially for short term margin trades
* Always trade leveraged tokens with caution because of the high level of risk involved.
