OKX Futures Trading: How to Use Leverage and What to Watch Out For
3 min read · · Korean original
Contents 4
When you trade futures on the OKX exchange, one of the features you'll use most is leverage. Leverage lets you manage a larger position with a small amount of capital.
Put simply, you put up collateral (margin) with the exchange and trade at a multiple based on it. This can bring big profits, but it also increases the potential for losses, so you need to be careful.
In this post, we'll take a detailed look at what leverage is, how you can use it, what to watch out for, and how to actually adjust it.
- Leverage is a capital-efficient tool that lets you hold a large position even with a small amount of capital.
- Risk management is essential. You must always combine it with strategies such as stop losses.
- On the trading screen, you can adjust it in this order: leverage settings → choose a multiplier → confirm.
What is leverage?
Leverage is "a tool for managing an amount larger than the assets you hold." For example, if you use 2x leverage, you can put up to twice your assets to work.
| Capital | Leverage multiplier | Tradable amount |
|---|---|---|
| $100 | X1 (spot) | $100 |
| $100 | X5 | $500 |
| $100 | X10 | $1,000 |
| $100 | X20 | $2,000 |
As you can see, even if you only have $100 right now, using 20x leverage lets you manage a position worth $2,000.
When is leverage used?
Leverage is used to maximize the efficiency of the assets you hold. So you might use it when the market is moving in your favor or when you spot a good opportunity.
With leverage, the same market move produces profits multiplied by your leverage. So what happens if the market rises 1% while you're using 20x leverage?
In this case, you could theoretically make a 20% profit. Used well, leverage can bring large profits from price movements in a short time.
When using leverage, watch out for the risk of liquidation. In leveraged trading, not only profits but also losses grow proportionally. Beginners in particular need to be careful, as using high leverage can wipe out all of their capital in an instant.
You can also diversify your portfolio by using only part of your capital for a leveraged position and putting the rest into other assets.
Finally, when the market is falling, you can use leverage to open a short position that hedges against a drop in the value of the assets you hold and earns additional profit.
How do I adjust leverage?
Here's how to adjust leverage on the OKX exchange. First, go to the futures trading page. In the trading panel, you'll see a button for setting the leverage multiplier.
Here, you can choose one of the available options, such as 5x, 10x or 20x. The maximum multiplier offered may differ for each coin, and so may the maximum allowed position size.
Select the leverage you want and press 'Confirm', and you're done. Before using leverage, don't forget to check that you've chosen the right trading mode: cross or isolated.
What should I check when trading with leverage?
Leveraged trading is a high-risk strategy in which "risk" also grows proportionally. That's why you must minimize losses with risk management strategies such as stop losses.
It's also a good idea not to get greedy and to calculate in advance the multiplier and position size that suit the purpose of your capital. In particular, you shouldn't use high leverage on highly volatile assets such as altcoins; it's better to use low leverage or none at all.
Finally, different rules may apply depending on the exchange and the coin ticker. So it's important to understand those rules clearly before you start trading with leverage.
