The cryptocurrency market is actively developing not only technologically and increasing in volume, but also adapting traditional financial practices to its needs. That’s what happening to trading techniques when applied to crypto investing. We already have bitcoin futures, market calls and candles and big financial institutions are even considering launching cryptocurrency trading desks. Today we are talking about cryptocurrency margin trading features.
What is margin trading?
Margin trading (margins or leverage trading) offers you a possibility to borrow additional assets (fiat money or cryptocurrency) leveraging the number of cryptocurrencies that you already own to buy additional crypto assets.
This practice comes from traditional trading world and has been applied to crypto industry by many exchanges. The main difference is that in the traditional markets you’ll face tons of rules and regulations while in crypto it’s quite simple for now.
Let’s take a simple example. Let’s say that you want to buy $1000 worth Bitcoin with only $500 in your pocket. To get extra $500 you can borrow them through the margin of 2:1 (2x, it means for every dollar you have, you will get extra one dollar to invest). If Bitcoin price increases by 10%, you get 20% instead of initial 10% profit. However, in a negative scenario if the initial price decreases by 50% you’ll be left with nothing.
So the margin trading (as well as any type of crypto trading) is a high risk but possible high profit escapade.
Important steps to consider
- Do not neglect technical analysis basics to make correct estimations before you start.
- You should also study sound risk management beforehand
- Do not use your full margin balance for one operation
- Always keep a cushion of funds which can support the trade
- Be prepared to lose all the investment, never invest more than you can afford to lose.
- Prepare a risk management plan to help you recover in case of failure
Best margin trading options through crypto exchanges
BitMex is the most popular exchange for margin trading right now with a very strong team and good conditions for traders. This platform offers 6 cryptocurrencies:
|Coins||Leverage||Maker fee||Taker fee||Settlement fee|
|Bitcoin Cash (BCH)||20x||-0.05%||0.25%||0.00%|
Huobi is an exchange with headquarters in Singapore operating since 2013. Huobi offers 10 cryptocurrency options for margin trading with possible leverage up to 5X in BTC
Bitfinex is one of the oldest crypto exchanges on the market operating since 2014 with headquarters in Hong Kong. Bitfinex allows you to margin trade and get a leverage of up to 3.33X offering 13 cryptocurrency options.
|CURRENCY||FLASH RETURN RATE||TOTAL SUM OF ACTIVE FUNDING||TOTAL AMOUNT USED |
IN MARGIN POSITIONS
Poloniex, an exchange founded by Tristan D’Agosta in 2014 is currently owned by Circle, an internet financial limited. Poloniex offers a leverage up to 2.5X in BTC and margin trade following 11 cryptocurrencies for BTC:
Whaleclub is also based in Hong Kong offering margin trading of cryptocurrencies, commodities, and forex. 5 cryptocurrencies are available for margin trading: BTC, LTC, ETH, XMR, and DASH.
Margin trading is a great opportunity for experienced investors who understand the market and know what they are doing. You should remember that it’s a very risky approach and you’ll need to do a deep research before taking the loan.