Bitcoin And Cryptocurrency Margin Trading – List Of Best Margin Trading Exchanges And CFDs
The benefits of Bitcoin and cryptocurrency margin trading are numerous. By allowing for incredible profitability and the ability to trade on the short side, margin trading has become popular with cryptocurrency traders of all experience levels.
What Is Bitcoin Margin Trading?
Margin trading, also known as leverage trading, is a method of trading assets using funds provided by a third party. When compared to regular trading accounts, margin accounts allow traders to access greater sums of capital, allowing them to leverage their positions. Essentially, margin trading amplifies trading results so that traders are able to realize larger profits on successful trades. This ability to expand trading results makes margin trading especially popular in low-volatility markets, particularly the international Forex market. Still, margin trading is also used in stock, commodity, and cryptocurrency markets.
Bitcoin And Cryptocurrency Margin Trading
Bitcoin and cryptocurrency margin trading allow opening a trading position with leverage, by borrowing funds from the exchange.
For example, if traders opened a Bitcoin margin position with a 2X leverage and Bitcoin had increased by 10%, then their position would have yielded 20% because of the 2X leverage. With no leverage, it would have been only a 10% ROI.
Margin leverage can also be 25X and even higher 100X, despite the risk, the same position as described above would have yielded 250% (instead of 10% with no leverage).
How Does Bitcoin Margin Trading Work?
When a margin trade is initiated, traders will be required to commit a percentage of the total order value. This initial investment is known as the margin, and it is closely related to the leverage. In other words, margin trading accounts are used to create leveraged trading, and the leverage describes the ratio of borrowed funds to the margin.
If things go right, huge gains can be expected. On the other hand, the wrong move could end up breaking traders as they battle high interest rates, margin calls, and order liquidation.
Margin Calls
If a margin trade goes in the wrong direction, traders will be required to add funds to their accounts in order to avoid order liquidation. This is known as a margin call. If a trader is unable to provide further funds to secure an order, it will be closed out automatically.
Liquidation
If a margin trade loses more money than the trader has on hand, the trade will be liquidated. This means the position will automatically close and the trader loses all of his money. Chances of liquidation increase dramatically when margin trading.
For example: Let’s assume you have only $100 and you buy $10,000 worth of Bitcoin (with a 100x leverage). If Bitcoin’s price drops by $1, you effectively lost $100 because of how much you’re leveraged. In this case, you don’t have any more money in your account and your trade will be liquidated.
As you can see, leveraged trading goes both ways – leverage amplifies both profits and losses
Bitcoin Margin Trading Position Types
Bitcoin margin trading can be used to open both Long (Buy) and Short (Sell) positions. A long position reflects an assumption that the price of Bitcoin will go up, while a short position reflects the opposite. While the margin position is open, the trader’s assets act as collateral for the borrowed funds. This is critical for traders to understand, as most brokerages reserve the right to force the sale of these assets in case the market moves against their position (above or below a certain threshold).
A short position (sell), is created when traders sell a Bitcoin first with the intention of repurchasing it or covering it later at a lower price. Traders may decide to open a short position Bitcoin when they believe that the Bitcoin price is likely to decrease in the near future. There are two types of short positions: naked and covered. A naked short position is when traders sell Bitcoin without having possession of it. A covered short position is when traders borrow Bitcoin from the exchange’s loan department; in return, the trader pays a borrow-rate during the time the short position is in place.
Advantage And Disadvantage Margin Trading
Advantage: The most obvious advantage of margin trading is the fact that it can result in larger profits due to the greater relative value of the trading positions. Other than that, margin trading can be useful for diversification, as traders can open several positions with relatively small amounts of investment capital. Finally, having a margin account may make it easier for traders to open positions quickly without having to shift large sums of money to their accounts.
Disadvantage: Margin trading does have the obvious disadvantage of increasing losses in the same way that it can increase gains. Unlike the regular spot trading, margin trading amplifies the possibility of losses that exceed a trader’s initial investment and, as such, is considered a high-risk trading method. Depending on the amount of leverage involved in a trade, even a small drop in the market price may cause substantial losses for traders. For this reason, it’s important that investors who decide to utilize margin trading employ proper risk management strategies and make use of risk mitigation tools.
List Of Best Margin Trading Exchanges And CFDs
Exchange Details Website
StormGain
– Maximum Leverage: 200X
– Type: Futures & Perpetual Contract
– Deposit And Withdrawal Method: Cryptocurrency (Crypto)
– Fees: 0.15% – 0.25% + funding fee
– One Of Best Margin Trading Exchanges
HotForex
– Maximum Leverage: 1,000X
– Type: Contract For Difference (CFDs)
– Deposit And Withdrawal Method: Fiat
– Fees: 0% + spreads + funding fee
– One Of Best Forex And CFDs Brokers
BitMex
– Maximum Leverage: 100X
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– Type: Futures & Perpetual Contract
– Deposit And Withdrawal Method: Cryptocurrency (Crypto)
– Fees: 0.075% Taker + funding fee
– One Of Best Margin Trading Exchanges
Binance Futures
– Maximum Leverage: 125X
– Type: Futures & Perpetual Contract
– Deposit And Withdrawal Method: Cryptocurrency (Crypto)
– Fees: 0.02% Maker; 0.04% Taker + funding fee
– One Of Best Margin Trading Exchanges
Bitfinex
– Maximum Leverage: 3.3X
– Type: Futures & Perpetual Contract
– Deposit And Withdrawal Method: Cryptocurrency (Crypto) and Fiat
– Fees: 0.1% Maker; 0.2% Taker + funding fee
– One Of Best Margin Trading Exchanges
eToro
– Maximum Leverage: 30X
– Type: Contract For Difference (CFDs)
– Deposit And Withdrawal Method: Fiat
– Fees: 0% + spreads + funding fee
– One Of Best Forex And CFDs Brokers
Bitcoin Margin Trading Tips For Beginner
Margin Trading is inherently riskier than regular trading, but when it comes to Bitcoin and cryptocurrencies, the risks are even higher. Owing to the high levels of volatility, typical to these markets, cryptocurrency margin traders should be especially careful. We have some trading tips for beginner:
Always start trading with small amounts and low leverage:
Trading with small amounts and low leverage is a simple way for newer traders to get to grips with the market, providing traders with more ‘breathing room’ compared to high-leverage positions. Once a trader feels comfortable with around 2-5X leverage and has a thorough understanding of a platform’s margin call levels, they might then want to begin testing higher leverages to increase the profitability of trades.
Understand the fundamentals of margin trading:
For any trader to be successful, solid fundamentals are an absolute necessity. However, there are a huge number of inexperienced traders that skip out on the fundamentals and just dive straight into the market. So, many beginner traders have poor risk control, are unable to recognize most potential opportunities, and are frequently unable to keep emotions out of their trading decisions. This frequently leaves inexperienced traders holding onto losing positions for far longer than necessary – which can be potentially catastrophic when trading with leverage.
To avoid this, traders should learn the fundamentals of technical and sentiment analysis before embarking on any large trades. Most exchange platforms will provide a wealth of educational materials to users. Besides, traders can use TradingView, where provides regular updates on the current market situation – as well as up-to-date market analyses.
Additionally, let pay attention to major events surrounding the crypto space, like Bitcoin ETF decisions, US SEC regulations and so on, can have a significant effect on the price of Bitcoin and cryptocurrencies. Even though many traders rely only on technical analysis, keep in mind that those events might have a critical impact on the crypto market.
Risk Management:
When trading on margin, set clear rules of risk management, beware of excessive greed. Take into account the amount you are willing to risk, keeping in mind that it can be lost entirely. Set levels for closing positions: take profit levels and the most important – set up stop-loss levels.
Conclusion
Margin trading is a useful tool for those looking to amplify profits of their successful trades. If used properly, the leveraged trading provided by margin accounts can aid in both profitability and portfolio diversification.
As mentioned, however, this method of trading can also amplify losses and involves much higher risks. So, margin trading is only suitable for experienced traders. If you’re just starting out it’s better to use demo accounts or start trading with small amounts and low leverage or without any leverage before taking it up a notch.
Bitcoin And Cryptocurrency Margin Trading – List Of Best Margin Trading Exchanges And CFDs – Cryptokiemtien
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