What is the maximum leveraged offered in binance futures trading

Fellow Binancians,

Binance Futures has updated margin tiers of the

BTC

and

ETH

BUSD-margined contracts on 2021-08-17 at 12:30 PM (UTC) with new

leverage and margin tiers

as reflected in the table below. Position value and maintenance margin has been adjusted in each tier.

  • BTCBUSD

    ,

    ETHBUSD

Leverage

Position

Before Change


(Notional Value in BUSD)

Position

After Change


(Notional Value in BUSD)

Initial Margin Rate

Maintenance Margin Rate (After Change)

26-50x

0 < Position ≤ 5,000

0 < Position ≤ 25,000

2.00%

0.40%

21-25x

5,000 < Position ≤ 25,000

25,000 < Position ≤ 100,000

4.00%

0.50%

11-20x

25,000 < Position ≤ 100,000

100,000 < Position ≤ 500,000

5.00%

1.00%

7-10x

100,000 < Position ≤ 500,000

500,000 < Position ≤ 1,000,000

10.00%

2.50%

6x

500,000 < Position ≤ 2,000,000

1,000,000 < Position ≤ 2,000,000

16.67%

5.00%

5x

2,000,000 < Position ≤ 5,000,000

2,000,000 < Position ≤ 5,000,000

20.00%

10.00%

4x

5,000,000 < Position ≤ 10,000,000

5,000,000 < Position ≤ 10,000,000

25.00%

12.50%

3x

10,000,000 < Position ≤ 20,000,000

10,000,000 < Position ≤ 20,000,000

33.33%

15.00%

2x

20,000,000 < Position ≤ 60,000,000

20,000,000 < Position ≤ 30,000,000

50.00%

25.00%

1x

20,000,000 < Position≤ 60,000,000

30,000,000 < Position ≤ 60,000,000

100.00%

50.00%

Further information:

Risk Warning: Futures trading carries substantial risk and the possibility of both significant profits and losses. Past gains are not indicative of future returns. All of your margin balance may be liquidated in the event of extreme price movements. The information here should not be regarded as financial or investment advice from Binance. All trading strategies are used at your discretion and your own risk. Binance will not be liable to you for any loss that might arise from your use of Futures. To learn more about how to protect yourself, visit our

Responsible Trading resource page

.

Thanks for your support!

Binance Team

2021-08-18

Find us on

Binance reserves the right in its sole discretion to amend or change or cancel this announcement at any time and for any reasons without prior notice.

Binance, the world’s largest cryptocurrency exchange, continues adopting new leverage trading restrictions on its futures platform in a move to expand consumer protection.

After introducing a 20x leverage limit for new users on July 19, Binance Futures is preparing to apply the same limit for existing users soon, Binance CEO Changpeng Zhao announced Sunday.

“We didn’t want to make this a thingy,” the CEO said, noting that the new restrictions will be applied “over the next few weeks.”

Effective last Monday, new users with registered Binance Futures accounts of less than 30 days were prohibited from opening positions with leverage exceeding 20x. The new leverage limits will also apply to existing users with registered futures accounts of less than 30 days, according to Binance’s leverage trading page. “Leverage limits for new users will gradually increase only after one month from registration,” Binance noted.

Launched in July 2019, the Binance Futures trading platform initially allowed investors to open leverage positions at a maximum of 20 times, meaning that an investment of $1,000 could be turned into a bet of $20,000. The exchange subsequently increased maximum leverage and margin on Bitcoin (BTC) against Tether (USDT) contracts to 125x in October, noting that highly leveraged trading was introduced using a “sophisticated risk engine and liquidation model.”

“At 125x leverage, a 100 USDT collateral deposit on Binance Futures will allow users to hold 12,500 USDT in BTC,” the firm said at the time.

Related: FTX reduces max leverage from 101x to 20x to encourage ‘responsible trading’

The latest trading restrictions echo a recent move by FTX, one of the world’s largest cryptocurrency exchanges. The company officially announced a reduction in maximum leverage from 101x to 20x on Sunday. “Again, this will hit a tiny fraction of activity on the platform, and while many users have expressed that they like having the option, very few use it,” FTX founder and CEO Sam Bankman-Fried noted.

The new restrictions came after a Friday article in The New York Times alleging that risky trades offered on FTX and other crypto exchanges like Binance and BitMEX prompted a crypto market crash in May.

Key Takeaways:

  • Leverage allows for better capital efficiency as traders do not have to lock up entire amounts of capital.

  • However, over-leveraging is one of the common reasons why novice traders fail.

  • An appropriate leverage amount is determined by a trader’s expertise, risk tolerance, and comfort level while trading in cryptocurrency markets.

Leverage is an essential tool across traditional and cryptocurrency markets. It allows for better capital efficiency as traders do not have to lock up entire amounts of capital. Together with futures and options, they help introduce liquidity into the market. Because the use of leverage necessarily increases both potential returns and risks, users must always exercise caution. 

Over-leveraging, or the misuse of leverage, is one of the common reasons why novice traders fail. It is akin to aiming a home run on every swing — the problem with this approach is that it is incredibly unsustainable. Needless to say, a high-risk, all-or-nothing environment where any slight mistake can wipe out a trader’s capital is not the kind of environment we advocate at Binance Futures. 

Mistakes will inevitably happen during trading; no one person or a perfect algorithm can precisely predict every market’s movement. To ensure that mistakes do not eliminate your capital, your self-esteem, and your chance of learning from errors, do not over-leverage. Especially with cryptocurrencies being extremely volatile and unpredictable, over-leveraging can materially damage your odds of success on any particular trade and potentially lead to outsized losses.

At Binance Futures, we believe that all our clients should fully understand the impact of leverage and the circumstances under which it can significantly damage the probability of a profitable trade. We also believe that allowing excessive leverage is not in the interests of our clients, our firm, or our industry.

How Does High Leverage Impact Your Trades?

Not only does leverage amplify your losses, but it also amplifies your transaction costs. The associated transaction costs of using high leverage can gradually drain your capital. 

Let’s say you have deposited 500 USDT in your Binance Futures wallet. You decided to open a 100x leverage position with your 500 USDT deposit, giving you a total exposure of 50,000 USDT (500 x 100). Considering the standard taker fee of 0.04%, the cost to open this position will be 20 USDT — that is 4% of your account!

With one trade and the market not even moving yet, you already have to account for 4% in calculating your overall P&L. Therefore, your account balance shrinks if your position goes wrong, thereby increasing your effective leverage. Furthermore, when trading perpetual contracts, you would incur funding fees that are charged every eight hours. Assuming a low funding fee of 0.01% (or 0.04% daily), this would translate to an additional 20 USDT daily deduction from your account balance. 

Therefore, traders must consider the associated cost of using high leverage as it may have a profound impact on your account over time: the higher your leverage, the higher your transaction cost as a percentage of your trading capital. 

This demonstrates how excessive leverage distorts the likelihood of your trade being successful. This distortion is caused by the interaction of leverage and transaction costs, such as commissions and funding. In other words, high transaction costs as a percentage of your trading capital can shift the odds against you.

If your margin is smaller than 100x of your position’s market value, your chances of losing start to rise extremely quickly. This is because expenses chip away at your margin capital, resulting in a greater likelihood of liquidation. 

What Measures Have We Taken to Avoid This From Happening?

Binance Futures is the first cryptocurrency exchange to establish a Responsible Trading program, devoting resources to further educating users on the dangers of trading and introducing safety measures including leverage limits, anti-addiction limitations, and “cooling-off” suspension features.

We are engaging more users and are conscious of greater responsibility in safeguarding them as global adoption accelerates. However, we would like to remind you that the cryptocurrency market is risky, and all users who want to engage must exercise care and self-assessment. Beginner users should use caution and engage in responsible trading practices. This is why we require users to take compulsory quizzes and complete training videos when users sign-up for futures trading.

In addition, we also limit our maximum leverage for new accounts to expand consumer protection further. On July 19th, 2021, Binance Futures started limiting leverage levels up to a maximum of 20x for accounts opened within 30 days.

This new rule was further enhanced on July 27th, 2021, where we decided to further extend the leverage limits for new accounts from 30 days to 60 days. This means new futures accounts cannot access leverage exceeding 20x within 60 days of registration. 

The majority of users on Binance Futures do not use high leverage levels, and a number of our users do not utilize any leverage at all. Nonetheless, this new measure is an additional way we can help protect new users on our platform.

How to Pick an Appropriate Leverage Level

We encourage you not to use the maximum allowable leverage as a matter of habit when trading. Our maximum allowed leverage provides flexibility when you need it, but you should always opt for a conservative amount of leverage in the normal course of trading.

Before deciding on a degree of leverage, investors should examine generally recognized guidelines. The three most basic principles of leverage are as follows:

  • First, maintain low levels of leverage.

  • Use stop-orders to reduce downside and protect capital.

  • Limit capital to 1% to 2% of total trading capital on each position taken.

Traders should use a leverage amount that suits them. For example, if you’re conservative or new to cryptocurrency trading, a 5x or 2x leverage would be appropriate.

An appropriate leverage amount is determined by a trader’s expertise, risk tolerance, and comfort level while trading in cryptocurrency markets. Novice traders should always use caution as they learn how to trade and gain expertise.

Final Thoughts

It’s not only the users who bear responsibility. Every exchange must assume responsibility for educating its users as much as for allowing users to utilize their platform services and features. 

Binance Futures will continue to invest efforts and resources into both aspects of platform security and risk management mechanisms to secure and protect our users and their fund. 

Furthermore, as regulatory frameworks for our young crypto industry continue to shape up worldwide, Binance Futures is taking concrete steps in our commitment to compliance and working with regulators to protect users, encourage innovation, and build a fair and sustainable industry.

Read the following helpful articles for more information about Binance Futures:

Disclaimer: Crypto assets are volatile products with a high risk of losing money quickly. Prices can fluctuate significantly on any given day. Due to these price fluctuations, your holdings may significantly increase or decrease in value at any given moment, which can result in a loss of all the capital you have invested in a transaction.

Therefore, you should not trade or invest money you cannot afford to lose. It is crucial that you fully understand the risks involved before deciding to trade with us in light of your financial resources, level of experience, and risk appetite. If required, you should seek advice from an independent financial advisor. The actual returns and losses experienced by you will vary depending on many factors, including, but not limited to, market behavior, market movement, and your trade size. Past performance is not a guide to future performance. The value of your investments may go up or down. Learn more here

Written by Jane