Bitcoin margin trading: the best exchanges for Bitcoin trading with leverage, nuances and recommendations
Bitcoin margin trading is trading with an auxiliary leverage that allows you to increase the available capital for performing transactions on exchanges. This mode is suitable for traders with a limited budget, but wanting to trade with large amounts. You should be aware that the risks in margin trading are very high, so this method is not recommended for beginners.
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What is Bitcoin Margin Trading
On most exchanges, this process is organized thanks to the lending system. The lender provides the trader with a loan so that he can invest in more cryptocurrency. The lender benefits from this in terms of interest on the loan.
On some exchanges, the site itself provides a loan from its own funds, on others (for example, Poloniex), users do it. Anyone can loan their BTC or altcoins and receive passive income in the form of interest.
Margin trading allows you to open more significant trading positions – on some platforms, the leverage reaches 1: 1000, that is, you can use 1000 times more amount in trading than is on the account.
Types of margin trading
There are usually three main types of leveraged trading:
✅ Margin spot trading, in which a loan is taken from an exchange or another trader. The method is used on Binance, Poloniex. It is the implementation of trading operations with assets issued on a loan basis. In addition to cryptocurrencies, in this way they trade stocks, futures and any other goods. The specificity of margin lending includes a number of features: a loan can be obtained instantly, without any checks and approvals; own funds on the client’s account act as collateral (or “margin”).
✅ Derivatives trading – perpetual futures contracts or with an expiration date. Bitmex, Bybit, Huobi, Deribit, Delta Exchange specialize in this method. Derivatives are derivative contracts from other instruments (currencies, commodities, etc.). Derivatives trading involves trading financial risks associated with a specific type of asset. It makes it possible to make a profit by predicting the growth of asset prices This approach is purely speculative.
✅ Trade CFDs or Contracts for Difference. The method applies more to Forex brokers than cryptocurrencies. A contract for difference is an agreement concluded between a buyer and a seller, the subject of which is the transfer of the difference between the current actual value of an asset and its value at the time of the expiration of the contract. If the rate has increased during this time, the buyer gets the profit, if it decreases, then the seller.
Some exchanges, like Bybit, offer great leverage for perpetual contracts. In the traditional spot margin market, leverage is typically less than 1: 5 and is associated with high borrowing costs. For futures contracts, the leverage is within 1:20. But with the use of leverage up to 100x, traders have the opportunity to adjust the leverage and margin of an already open position at any time, thereby managing their risks as flexibly as possible.
Advantages and Disadvantages of Margin Trading
Pros: ✅
✅ The ability to artificially increase your position. The amount that the platform can provide depends on the initial amount on the client’s account and the specific conditions of the exchange.
✅ A trader can open a position as quickly as possible without transferring a large amount of funds to his account.
✅ Convenient for diversifying investments – you can open several positions for different assets, having a small investment capital.
Cons: ❌
❌ The need to pay a commission on loan funds.
❌ Significant degree of risk. Wrong actions will lead to the fact that the trader will not only lose his savings. Exchanges and brokers combat this by applying a margin call function where a position is forced to close at a certain level of risk.
Choosing an exchange for margin trading Bitcoin: nuances and recommendations
When choosing the best exchange for margin trading, you need to build on personal preferences and the reputation of the site. What to look for:
- Supported cryptocurrencies and contracts.
- In which cryptocurrency the borrowed funds are secured, commissions are charged and other auxiliary operations are performed on the exchange.
- Conditions regarding the leverage interest rate.
- How often financing occurs – the process that keeps the price of contracts in line with the price of the underlying assets.
- Availability of spreads, overnight rollover of positions and other individual characteristics.
- Taker and maker fees.
In addition, factors such as user-friendliness of the interface, efficiency of technical support, and the safety of storing user funds are important.
Exchanges
Consider the most popular cryptocurrency exchanges that provide the opportunity for margin trading in Bitcoin.
Bitmex
Bitmex is among the leaders in terms of trading volumes among existing platforms with the possibility of margin trading. It is convenient for beginners that you can start with a minimum capital, opening positions in some lots as little as $ 1. The site has been fully translated into Russian.
Main characteristics:
✅ Leverage – up to 100x
✅ Verification – optional
✅ Fiat support – no
✅ Minimum deposit – 0.0001 XBT
✅ website bitmex.com
Binance
To get started, you need to create a separate margin account on the Binance exchange. This feature is only available to verified accounts with 2FA enabled. After creating an account, you can transfer money to it from your main balance to use it as collateral (margin).
✅ Leverage – up to 3x
✅ Verification is required
✅ Fiat support – yes
✅ Minimum deposit – 0.002 BTC
✅ binance.com website
ByBit
The Bybit exchange is in many ways similar to Bitmex and specializes mainly in perpetual contracts (BTCUSD, ETHUSD, EOSUSD, XRPUSD). Supports Russian-language interface. The minimum order size, like on Bitmex, is $ 1. The main difference from competitors is that here you need to replenish your account in the currency you want to trade with. In most other platforms, the account is replenished in Bitcoins, which is then converted.
✅ Leverage – up to 100x
✅ Verification – not needed
✅ Fiat support – no
✅ Minimum deposit – no
✅ website bybit.com
Deribit
Deribit is also modeled after Bitmex, but focused specifically on derivatives trading. Here you can trade BTC / USD or ETH / USD perpetual futures, limited time contracts, as well as Ethereum and Bitcoin options. The site has recently gained popularity and become more liquid. You can deposit and withdraw funds only in Bitcoin. The minimum order size is $ 10.
✅ Leverage – up to 100x
✅ Verification – no
✅ Fiat support – no
✅ Minimum deposit – 0.001 BTC
✅ website deribit.com
Currency
Currency is the first officially regulated trading platform for tokenized assets and cryptocurrencies. You can trade in BTC and ETH currencies, stocks, tokens, commodities and other exchange commodities. Payments are accepted in the form of bank transfers or from VISA bank cards.
✅ Leverage – up to 20x for Bitcoin
✅ Verification is required
✅ Fiat support – yes
✅ Minimum deposit – 50 USD
✅ website currency.com
PrimeXBT
PrimeXBT is a new platform that has been operating since 2019, but has already gained popularity among traders. Among its analogues, it stands out for a large number of available trading pairs – both Bitcoin and a number of altcoins are supported.
✅ Leverage – up to 100x
✅ Verification – not needed
✅ Fiat support – yes
✅ Minimum deposit – 0.001 BTC
✅ website primexbt.com
Delta Exchange
The Delta Exchange project offers a large selection of trading pairs, including all sorts of altcoins. It develops very quickly, expanding its functionality. Allows you to trade futures or perpetual contracts with the lowest possible order of just $ 1.
✅ Leverage – up to 100x
✅ Verification – not needed
✅ Fiat support – no
✅ Minimum deposit – no
✅ delta.exchange website
Huobi
Huobi is a Chinese exchange with a consistently leading position in terms of trading volume. Offers a wide variety of cryptocurrencies that can be traded with or without leverage. Work with futures contracts is also available. The level of available leverage is different for each coin, with the maximum assigned to Bitcoin.
✅ Leverage – up to 5x
✅ Verification – optional
✅ Fiat support – OTC
✅ Minimum deposit – 0.001 BTC
✅ huobi.com website
Bitmax
Bitmax allows you to trade cryptocurrencies with or without leverage. Doesn’t support any kind of contracts. A nice feature is that there is no specific minimum for opening a margin trade, that is, a beginner can take advantage of this opportunity even with $ 5 in his pocket.
✅ Leverage – up to 10x
✅ Verification – optional
✅ Fiat support – no
✅ Minimum deposit – no
✅ bitmax.io website
Gate
The Gate.io platform resembles Huobi and also supports three trading methods – regular, margin or perpetual. The minimum order volume is $ 1. The exchange has the ability to enable the Russian-language interface. They note the high level of safety of the site, and it is not surprising, because it has been operating since 2013.
✅ Leverage – up to 3x
✅ Verification – optional
✅ Fiat support – no
✅ Minimum deposit – 0.0001 BTC
✅ Gate.io website
Types of orders on margin exchanges
Different exchanges support different types of orders. There are two main ones that are present absolutely everywhere. These are market (executed instantly at the current market price of the asset) and limit (indicating the desired price, executed as soon as the asset rate reaches the specified level).
Popular platforms with Bitcoin margin trading support the following types of orders:
- Bitmex: limit, market, limit and market with profit taking, market and limit stop, trailing stop.
- Binance: limit, market, limit stop.
- Bybit: limit, market, conditional.
- PrimeXBT: limit, market, market and limit stop, OCO (“one cancels the other”.
- Huobi: limit, market, limit stop.
- Gate: limit, with time and price conditions.
The more options there are, the more flexible margin trading can be organized on the exchange. Sometimes, a large profit depends on the choice of the right type of order, suitable for a specific moment.
Basic concepts
Let’s talk about the key concepts in Bitcoin margin trading that every trader should know.
What is Long (Long) and Short (Short)
It should be understood that the terms “short” and “long” positions in the cryptocurrency market are derived from their original meaning in stock exchanges.
A similar understanding has taken root on the crypto market, that is, when buying, traders open long positions, and when selling – short. With their help, a trader expects to make money on an increase or decrease in the exchange rate.
Shorting works like this: a trader takes a margin loan, sells cryptocurrency at the current market price, and expects the rate to fall. Then he buys the same amount of cryptocurrency, but at a lower rate. He gives credit to the site, and leaves the resulting difference to himself.
With a long, everything is easier – this is buying a cryptocurrency with the aim of selling it later at an increased rate and making money.
How to make money on short and long
- When shorting, a market participant takes a margin loan for a certain amount of cryptocurrency – he sells the exchange margin, receives funds, then quickly acquires coins that have become cheaper for them, returns the loan to the exchange, and leaves the difference for himself.
- When long, the trader buys coins at a lower rate and expects them to rise in price in order to sell them at a profit. The process can take several years, but a good income is possible at the exit.
What are Stop Loss and Take Profit
Stop Loss and Take Profit are one of the main tools for risk control and position management on the exchange.
Stop loss is necessary to reduce possible losses in case the rate unexpectedly turns in the wrong direction. The size of the stop loss is set based on the amount that it is not critical for a trader to lose in case of failure. It is almost impossible to control your risks in the market without a well-placed stop loss.
Take profit, in turn, is necessary to fix the profit. This is an order that closes a position if the rate has significantly moved in the right direction. Limiting profitability is also an important factor for reducing risks, since the trader himself, due to the psychological characteristics of a person, is not always able to exit the market on time, which ultimately leads to losses.
Active order parameters encountered when working with crypto-exchanges
An example of an active order on Bitmex with a leverage of 1x:
- Symbol – the name of the contract.
- Contract size – the volume of an open position in monetary terms. 1 contract for Bitmex is equal to 1 USD. In the example: a long position with a volume of 12 contracts is open. If there is a minus sign (-12) in front of the contract size, then the position is open for sale (short).
- Value – the volume of purchased / sold cryptocurrency in XBT (Bitcoin ticker on Bitmex).
- Entry price – the market entry price set in a limit order.
- Label price – serves to determine the parameters of contracts based on the current level of liquidity and in accordance with generally accepted financial accounting standards.
- Liquidation price is the maximum possible negative value of the value compared to the created order. Upon reaching this value, the order is automatically closed in a minus, and an amount equivalent to the initially determined value of the contracts is debited from the user’s account.
- Margin is a part of a market participant’s deposit that will be needed in case of unsuccessful trades to cover losses.
- ROE is the current result of an open order. If you close the deal right now, then the result of the gain / loss will be exactly as indicated by the exchange. The higher the selected leverage, the higher the ROE percentage will be.
- Unrealized PNL is the percentage of return on equity pledged at the moment for the transaction.
Basic trading rules
Here are some helpful tips and strategies to reduce the risk of losing funds when leveraging Bitcoin leveraged trading:
- Do not use leverage to the maximum. There should always be a margin in case of a sharp market reversal.
- Apply margin trading to diversify your portfolio. Then even if the rate of one asset drops significantly, the probability of a margin call will decrease.
- Be prepared for losses. No trader can trade only for profit. Try to think with a cool head and understand that sometimes it is better to exit a trade with a small loss than to hope for a reversal in the rate and thereby lose many times more.
- Manage risks. Do not disregard your investments, follow the news and other factors that may affect the rise or fall of prices.
- Use take and stop.
- Develop a trading strategy and follow it.
Conclusion
So, margin trading is trading with the use of borrowed funds, for which a collateral is given from equity capital. The advantages of this method are the ability to increase profits and use additional market situations.
Risks also increase – there is always the possibility of encountering a margin call, forced liquidation. In addition, you have to pay interest on the loan no matter how successfully you trade.
Margin trading is the choice of experienced traders who are well versed in the structure of the market and understand the possible risks. Beginners are better off investing in long-term positions.
