A notable benefit of derivatives is that you can trade with leverage. This way, you can maximize exposure and even with a small margin take on a sizeable position.
While this does increase risk – you could be liquidated and lose your entire margin – it can also amplify your profits significantly.
Leverage works by using a deposit, known as margin, to offer traders with increased exposure. Instead of putting up the full market value of an asset such as BTC, traders operate on margin – 50:1 leverage (or 50x) means that for every dollar traders stake in equity, they can trade $50. This is also known as a 2% margin trade.
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