in this video I will explain you what actually happens when trading Bitcoin with leverage how it works and what risks there are to consider what is leverage trading when you register on a crypto exchange and buy Bitcoin you are trading on the so-called spot Market you can buy or sell Bitcoin if I have a, and buy Bitcoin with them the value of my money changes one to one as a percentage of the Bitcoin price from the time of the purchase if the Bitcoin price Rises 5% the value of my invested Capital Also Rises by 5% is then worth € 1,050 leverage trading is different for one thing we usually do not trade Bitcoins directly but so-called Futures Futures are contracts which means that two parties agree to buy or sell a fixed amount of Bitcoins at a certain price on a certain date for an end user it makes no real difference as the prices of Bitcoin on the spot market and the Bitcoin contracts on the Futures Market are almost identical with leverage trading I'm now not just buying Bitcoin with my money but I can also borrow money and trade with it for example I could deposit €1,000 and then buy Bitcoin with a 5x leverage if the Bitcoin price now Rises 5% I don't make a profit of 5% and that's 50 but 5% times five and thus 25% plus which means that I would make a profit of €250 how does leverage trading work Bitcoin trading uses leverage so that profits and losses are Amplified for example if we use a 5x leverage our gains and losses will always be five times greater than if we were simply trading Bitcoin without any leverage Leverage is achieved by borrowing money from the trading platform If I deposit a th000 and use a 5x leverage I'm trading with a total of €5,000 my €1,000 are deposited as a collateral to cover any losses and with a 5x leverage I now have access to five times the amount for example in this case 5,000 e which I can trade with you also have to pay fees on this borrowed money which are automatically collected depending on how long you keep a position open these are called funding fees this amount depends on the position size and the current market conditions so if more other Traders are currently long or short other than that there are the typical order fees that occur when opening and closing positions with leverage trading we can also now profit not only from rising prices but also from falling prices let's take a look at the first example we want to bet on Rising prices and open a so-called long position with a 5x leverage this means that we deposit our € 1,000 as collateral and use the borrowed 5,000 to buy Bitcoin the price is currently at 50,000 which means we get 0.1 Bitcoin for our 5,000 now the price Rises by 10% to 55,000 the value of our 0.1 Bitcoin has therefore risen to 5,500 now we sell the 0.1 Bitcoin at this price and receive 5,500 in return we have to give back the €5,000 as we only borrowed them but the remaining 500 are our profit which we can keep now we also get our 1,000 back so we now have a total of € 1,500 this means that we have made a total profit of €500 on our original capital of €1,000 e which is an increase of 50% even though the price of Bitcoin has only risen by 10% so here we can see the effect of a 5ax leverage that has also increased our profits by five times let's now take a look at how you can bet on falling prices in leverage trading by opening a so-called short position this means that we again deposit our € 1,000 as collateral and use a 5x leverage in this time instead of borrowing Euros we take the 5,000 e in Bitcoin not Euros but this time we really borrow Bitcoin at a price of 50,000 this corresponds to 0.1 Bitcoin that we borrow we received this 0.1 one Bitcoin and what do we do with it we now sell it directly and receive 5,000 in return the price of Bitcoin now Falls by 10% to €45,000 the price has therefore moved in our desired Direction and we now want to close our position again this means that we have to buy back the 0.1 Bitcoin so that we can return them because we originally only borrowed 0.1 Bitcoin however 0.1 Bitcoin now has become cheaper due to the lower price and we only have to pay €4,500 for 0.1 Bitcoin at a price of €45,000 so we buy the 0.1 Bitcoin for 44,500 and return it to the platform the 500 that are still left is our profit which we can keep now we also get our €1,000 of collateral back and we can see that we now have a total of €1,500 and we have made a profit of 500 on our original ,000 this means that we have made a 50% profit on our Capital even though the price of Bitcoin has fallen 10% what are the risks of Leverage trading trading with leverage naturally always involves risks that you should always be aware of it can of course happen that the price does not move in the desired Direction and just as profits are multiplied losses are also multiplied let's say we take €1,000 and bet on Rising prices with a 5x leverage if the price goes up by 10% we make a profit of €500 and thus a gain of 50% however if the price Falls by 10% we make a loss of €500 and lose half of our initial amount if we take this to an extreme and say we use a 100x leverage we would double our money if the price only goes up by 1% but if the price goes down by 1% we would lose all of our invested Capital the question that is often asked is can you lose more money that you have invested can I actually gamble away the money that I borrowed this is not possible with a vast majority of platforms all the platforms that I use and that you can also find on my channel this is not possible so you can only lose a maximum of the amount that you have put in by yourself so you cannot get into any debt if a position goes so far into the red that the collateral you have deposited can no longer cover the losses the position is automatically closed by the platform this happens at the so-called liquidation price when you open a trade this price is displayed and this would be the price at which the position would be automatically closed and you would lose your entire stake for this trade however you don't have to let it get that far and reach this liquidation price but you can also protect yourself beforehand by setting a stop loss a stop loss ensures that the position is closed beforehand at a certain loss so that you can limit your loss for example if I enter a position with my own 1,000 e regardless of the leverage I can say that I want to close the position automatically if I lose 50 euros now I cannot lose more than these 50 EUR in this trade and this allows me to limit my own risks I hope this made the topic of Bitcoin trading a little easier to understand if you're more interested on the topic you're welcome to take a look at the video description where I have linked further tutorials and the best crypto trading platforms if you have any other questions always feel free to ask them in the comments