Q: What is leverage and how interest is charged on it by crypto exchanges?

Answer :

Leverage in the context of crypto trading refers to borrowing funds to increase the size of a trading position. Crypto exchanges allow users to trade with leverage, enabling them to control a larger position with a smaller amount of capital.

Interest on leverage, also known as funding or financing fees, is charged when a trader borrows funds to open a leveraged position. This interest is typically calculated and settled periodically, often every eight hours. The rate and direction of the funding depend on the market conditions and the position you hold. If you're long (buying), you might receive funding; if you're short (selling), you'll likely pay a funding fee.

It's important for traders to be aware of these fees, as they can impact the overall profitability of a leveraged trade. High leverage can amplify both gains and losses, making risk management crucial when trading with borrowed funds.