Cryptocurrency margin trading: a complete overview of leveraged trading on a cryptocurrency exchange. Key features, professional secrets, topical recommendations

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Among traders who speculate in cryptocurrency, margin trading is very popular. Such transactions with digital coins quickly increase the amount of capital available. However, the profitability of this technique is characterized by significant risks accompanying its application. Professional traders, knowing the nuances of marginal crypto trading, can minimize possible losses while earning big money at the same time.

The best exchanges with cryptocurrency margin trading:

Exchange nameExchange nameMargin leverageVerificationTrading commissionRussian languageTrading volume 24hYearDeposit
Binancebinance.comup to x125Nofrom 0.1%Yes$ 995 million$2017cryptocurrencies, fiat
Currencycurrency.comup to x100Yesfrom 0.075% taker; -0.025% makerYes$65 million2018cryptocurrencies; fiat (bank cards and transfers)
BitMexbitmex.comup to x100Yesperpetual contracts: taker 0.0750%; maker -0.0250% (rebate)Yes$2967 million2014Bitcoin (XBT)
Bybitbybit.comup to x100Notaker 0.0750%; maker -0.0250%Yes$1020 million2018Bitcoin, Ethereum, EOS, Ripple, Tether
EXMOexmo.meup to x3Notaker commission: 0.05%; maker: 0%.Yes$19.98 million2013cryptocurrencies; fiat
BitForex Exchangebitforex.comup to x100Nomaker’s commission: 0.04%; taker: 0.06%.Yes$194 million2018cryptocurrencies
Deribitderibit.comup to x100NoPerpetual BTC contracts: taker – 0.0750%, maker – 0.0250%; ETH: maker – 0.02%, taker – 0.05%Yes$401 million2016Bitcoin (BTC)
PrimeXBTprimexbt.comup to x100No0.05%Yes$200 million2018cryptocurrencies; fiat

There are many exchanges on the market that provide margin trading service. Up to 100x leverage for trading Bitcoins is provided by the Bitmex exchange, which is the most famous and liquid platform for trading derivatives. For other cryptocurrencies, the leverage is lower. Perpetual contracts and futures are available on it. Leverage up to 100x is available on the Bybit exchange, trading is carried out with perpetual contracts for cryptocurrency derivatives. You can get a registration bonus ($ 10) and your first deposit ($ 50). Verification is not required. Another popular margin crypto exchange is Binance (up to 3x leverage). You can use leverage in trading on it after verifying your account. Of the sites that support fiat, Currency should be highlighted.

Comparative characteristics and conditions of Bitmex and Bitfinex:

The Btcnewsweb.com editors will consider in detail the significant aspects of cryptocurrency margin trading. Will study the relevant recommendations of experienced speculators that can help optimize trading activities on crypto exchanges and increase profitability.

Features of cryptocurrency margin trading

The term “cryptocurrency margin trading” means a specific version of trading operations in which assets are virtual currencies. Such transactions are carried out on special trading platforms called crypto-exchanges.

Margin crypto trading differs from traditional operations in an extremely significant feature – a speculator, in order to earn more, uses personal as well as borrowed funds. The trader borrows the required amount of borrowed money from other cryptocurrency investors or from the exchange itself. The pledge is its existing assets on the trade balance.

By using borrowed capital, the speculator gets the opportunity to open orders with a large volume of virtual currencies. This directly determines the amount of potential profit.

Explanation! The phrase “margin trading” or “leveraged trading” implies the execution of trading operations in which collateral and borrowed funds are used. The word “margin” refers to the part of the trader’s trading capital used for collateral in order to get a certain loan from the exchange or other speculators.

Trading terminal of the margin cryptoexchange Bitmex:

The nuances of the work of margin crypto trading

It is advisable to consider the functioning of cryptocurrency trading with margin using a demo example. Presumably the trader has an initial capital of $ 120. At the same time, he confidently assumes a rapid increase in the value of specific altcoins. Knowing such data, he, of course, wants to quickly acquire crypto coins in order to subsequently wait for their price growth and sell them at a profit.

A speculator, knowing the principles of exchange trading, realizes the impossibility of buying a large number of coins for $ 120. To buy the desired volume of the selected cryptoasset, a trader on the exchange takes a loan. The amount of money that a cryptocurrency exchange can give a speculator with a $ 120 loan is determined by its policy. That is, the trading platform regulates the specific leverage for different conditions. When the leverage is set to 1:20, the trader has the option to leverage $ 2,400 on a trade. In the event of a real rise in the price of the selected cryptocurrency purchased for this amount, the trader will receive a profit, from which the borrowed funds plus a small commission will be deducted. However, the total income of the speculator will be 20 times higher as a result.

Important! The amount of commissions for providing margin and the leverage itself is set individually on different exchanges. Everything is due to the peculiarities of the functioning and the established policy!

Quite often, with margin crypto trading, the trader’s assumptions and predictions are not justified and the purchased coins, on the contrary, become cheaper. This situation will be unprofitable for a speculator. He will lose his own funds, and also from the amount of the pledge will cover the losses of the exchange floor or compensate the damage to the investor who borrowed the money.

If a trader enters into deals fractionally, then unsuccessful positions will quickly nullify his trading deposit than with the option of trading without leverage.

It is especially necessary to know when margin trading about the limit of the withdrawal of the transaction or in the aggregate of several orders in the negative. When the value of the loss exceeds the collateral amount, the automatic closing of transactions by the cryptocurrency exchange begins. The broker forcibly gets rid of the trader’s open positions in order to recover the collateral. A speculator in such an uncontrolled situation usually loses the entire deposit.

As soon as the amount of losses becomes critical, but the amount of the collateral has not yet reached, the system sends a special warning from the crypto exchange, called a margin call. This scheme is relevant for trading platforms, be it Forex or the stock exchange.

After the message about the imminent zeroing of the balance, the trader needs to quickly replenish the deposit so that the broker does not start closing active orders by selling the purchased coins.

Online terminal of the exchange with margin trading in Bitfinex cryptocurrency:

Secrets of margin crypto trading

According to practical observations, the effective efficiency of margin trading in cryptographic currencies is directly determined by the degree of professionalism of a trader or investor. In addition, the trading strategy used here is extremely relevant.

The tactical solutions used in crypto trading do not differ fundamentally from the strategies successfully practiced in classic fiat currencies trading on Forex or assets on stock exchanges. A cryptocurrency speculator can open orders to sell or buy cryptocurrency, focusing on the calculations and assumptions of the subsequent price movement of the selected digital coins. There is also an opportunity to attract borrowed money for dumping and pumping.

Competent traders have formulated a chain of simple principles, the adherence to which gives a real opportunity to consistently receive large profits when margin trading virtual currency. It is recommended to pay special attention to the following professional tips:

  • Never bring the situation to a margin call. You should learn how to stop a series of unprofitable transactions in time. As a rule, professional traders complete trading operations with a loss of 27-31% of the available deposit. When there is reasonable confidence in the imminent rise in price of the purchased cryptocoins, you can additionally replenish the trade balance to prevent the case of a margin call.
  • Before using the margin trading opportunity, you need to understand in detail the nuances of the commission charged by the broker. Often payments for the use of borrowed funds are made on a daily basis. Due to these features, clear adjustments in actions and amendments to the trading strategy are required in order to use the minimum time period leverage when trading cryptocurrency. This minimizes additional financial losses.
  • You need to scrupulously and extremely responsibly look for virtual currencies to make money. The option with altcoins, characterized by a significant level of volatility (in addition to bitcoin, this is, of course, litecoin, bitcoin cash, tether, of course, ethereum with ripple), is not very suitable for margin crypto trading, since the risk of a quick zeroing of the deposit is extremely high. Digital coins that show high volatility in trading sessions are preferable to be used in speculations without the use of leverage.
  • Also, the effectiveness of margin trading in coins is low, the price of which shows a scanty spread of fluctuations during trading. Here the trader will receive financial losses in the form of commissions to a broker or other speculator for the opportunity to trade with borrowed funds.
  • You should take into account the source of collateral in margin trading and control their volume. These are assets that are present on the trading balance of a working trader. Suppose the speculator had purchased altcoins with a total value of $ 110. If the price during the trading session drops to this level (deposit – minus $ 110), then the crypto exchange system will automatically close active positions and a bright zero or a few remaining cents will flaunt on the account. However, in case of a decrease in quotations and a loss of, say, $ 99, the trading floor will send a margin call message, indicating that all active positions will soon be “reset”. Therefore, it is very important to control the state of a trade deposit in order to prevent it from being reset. It requires continuous analysis of cryptocurrency quotes in the presence of open positions and timely control of the available amount of collateral, otherwise all capital will be lost almost instantly.

Conclusion

Margin trading in cryptocurrencies is a chance for good, relatively stable earnings. Competent traders, using leverage, are able to have a steady profit in virtually any financial markets, especially on crypto exchanges. This tool allows you to increase your capital without increasing your trading deposit. However, margin trading is characterized by an insidious quality – extreme riskiness. This aspect is relevant especially for novice speculators or for traders who illiterately control risks and negligently trade in situations of price instability.

It is necessary to prudently and prudently use the margin in crypto trading, since this market is specific and also highly volatile. Accurate analysis of exchange situations, a competent choice of digital assets, timely placement of stop-loss orders and activation of alerts are the basic minimum that can give a trader an income. Margin trading in cryptocurrencies, with careful, correct use, will definitely make trading activities effective and successful.

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