Leverage and Margin are related concepts that are commonly used in trading crypto and other financial markets.
Leverage is a great trading mechanism that allows traders to make larger trades with a smaller amount of capital. Leverage refers to the use of borrowed capital to increase the potential return of an investment.
This is done by borrowing funds from a broker or exchange to amplify the potential returns on a trade. In the context of crypto trading, leverage allows traders to make larger trades with less capital, which can be useful for maximising profits in a short period of time.
Margin is the amount of collateral that a trader must deposit in order to open a leveraged position. For example, if a trader wants to open a leveraged position with a 5:1 leverage ratio, they would need to deposit $1,000 to control $5,000 worth of crypto. Having a large Margin pushes the estimated liquidation price out further and reduces your risk of losing you capital in a single trade - if your Stop Loss strategy is used correctly.
It's important to note that while leverage can increase potential returns, it can also increase potential losses. Also, It's recommended to be aware of the risk management and regulations set by the exchange you are using.