What Do You Mean by Crypto Margin Trading and How Does It Really Work?

Crypto Margin Trading


Several people think that crypto margin trading is a complicated process. Crypto margin trading is a straightforward concept, and it allows the traders to borrow the required capital to harness the increased buying power and to enter into positions that are larger than their account balance. Margin trading is highly popular in low volatility, slow-moving markets, like Forex; but in recent days, it has been adopted in the cryptocurrency market as well. In this article, we have explained what is meant by crypto margin trading and how it works.

What is Crypto Margin Trading?

Crypto margin trading is a practice adopted in the trading industry that permits the traders to have exposure to a certain type of asset, by borrowing the capital from an exchange or traders. Compared with regular trading the traders use their capital to invest in trades; crypto margin trading permits the traders to get more capital than what they have in hand. It is also referred to as leverage trading, where the term leverage implies the trader can multiply their positions and they can open a trade by using 100x times leverage on their trades.

How Crypto Margin Trading Works?

Using Bitcoin in leveraged trading is a simple process.  A trader contributes a small amount of capital in return to get huge capital to trade with the specific asset thereby risking it to make more profit. If the trader wants to proceed with margin trading they should provide an initial deposit to open a position, which is also referred to as “initial margin”. They should also hold a certain amount of capital in their trading account, which is also referred to as “maintenance margin”.Cryptocurrency exchange provides different types of leverage.

Few new cryptocurrency exchanges in India provide 200x times leverage that permits their traders to open positions higher than their initial deposit.

Why should you Margin Trade?

Using crypto margin trading permits the traders to open trade positions that can be profitable; otherwise, they will be unable to access the position. A position that is closed successfully using 100x times leverage will benefit the trader more than normal trade. Using Bitcoins in margin trading and other cryptocurrencies will help traders earn more profit when the market becomes volatile.

What are the strategies for Crypto Margin Trading?

Numerous strategies and practices will help the trader when they proceed with crypto margin trading.

  • The trader should set clearly defined goals and should concentrate on risk management when they are margin trading. This strategy can establish a clear profit goal; moreover, they should adhere to stop loss level, and exit goals to achieve profits.
  • The trader should always use a demo trading platform, that does not ask the trader to use their real money; but it helps new traders to use and check their trade strategies in real-time trading, without using their capital.
  • The user should always pay more attention to the interest and fees when they are using margin trading. When they open a margin trading position, they need to pay interest for their borrowed capital margin. Margin trading using cryptocurrencies and Bitcoin are charged ongoing fees that might cut the profits of the trader.

To Sum Up

To conclude, crypto margin trading provides several advantages and helps to minimize the threats of exchange hacks. Before using leverage trading, the user should understand the crypto trading meaning, how trading works; this helps the traders to understand the concept and let them go for larger trades with more capital.  Experts suggest that the players should stay away from margin trading; they need to analyze, research and then use margin trading for a specific purpose like hedging. The traders can lose their money through margin cryptocurrency trading if they are not careful, leading to high stress levels.