Leveraged trading in forex and crypto assets includes opening a margin account, where the trader puts up only a portion of capital required to open a trade. The rest of the capital is offered by the broker. So, with a small initial capital outlay, traders have greater exposure to the markets.
Let’s suppose a trader wants to assume a long position in BTC/USD pair. To buy 10 bitcoins at the current price of $9,592. To open a position at a traditional exchange the trader will have to pay 10 x $9,592, for a position of $95,920. If price of BTC goes up by 5%, the 10 BTC coins are now worth $10,552 each.
At this point, if the trader chooses to sell they will make a profit of $9,592 from the original investment of $95,920.
Now suppose the trader opens this position with a leverage of 1:100. This means they will have to pay only 1% of this position, which is $959 to open the trade. When the price rises by 5%, they make the same profit but at a considerable lesser cost.
However, do keep in mind that while trading with leverage increases how much you could make, it does also increase the risks of how much you could lose.