How to Start Margin Trading Cryptocurrency
The cryptocurrency market is maturing, and many people want to know how to navigate the sector. Anyone reading this article must be having some serious thoughts about launching a crypto trading adventure. Further, we assume that you have done a lot of research on the nature of cryptocurrency while exploring ways through which you can earn from them. If so, you must have come across specific terms like ‘Margin’ or ‘Leverage’ and so on. We might be able to answer some provocative questions you have if you read to the end.
What is margin trading?
Before going into the details of the concept of margin trading, it is prudent to understand its definition. Margin trading is simply the ability of a trader to enter trade positions whose value is more significant than the funds in the trader’s account. If you are trading cryptocurrency, it means that the cryptocurrency exchange will loan you some amount to facilitate entering big value positions.
Consider this example. You have $200 in your account, which you deposited soon after opening an account with your favourite cryptocurrency exchange. After your analysis, you believe that the value of the BTC/USDT will increase after a given period. However, the $200 in your account will limit the amount of profits you will earn. Then you borrow an extra $200 from the exchange so that you can open a position worth $400. The extra $200 you borrowed is what traders call ‘Margin.’
Subsequently, the ‘Margin’ helps you to create an advantage that traders call ‘Leverage.’ Usually, leverage is the ratio of the funds you commit to a trade to the value of the trade. Therefore, if you commit $200 and the value of the trade is $400, the leverage is 2:1.
How do you start margin trading?
The first and obvious step is to open an account with a cryptocurrency exchange. Alternatively, you can open an account with a platform like TrailingCrypto, which brings together several cryptocurrency exchanges. The platform links your account to all the exchanges on it such that you can trade on any of them. Let us go ahead and open an account on TrailingCrypto.
When you open the TrailingCrypto.com website, this window will open up.
Next, click on the button labeled ‘Try for Free.’ Afterward, a pop-up window will open with further instructions to either ‘Sign Up’ or to ‘Log In’ if you are an existing user.
Once your account is set up, you can access the TrailingCrypto platform. From the platform, you can access 15 cryptocurrency exchanges, including BitMex, Binance, KuCoin, Huobi, and many more. However, BitMex is the only exchange of the 15 that allows for margin trading. Therefore, we will open BitMEX from our dashboard on the TrailingCrypto platform.
Once you have selected BitMEX, you can go ahead and start margin trading. On BitMEX, you have a range of margin options from ‘Cross,’ which implies a ratio of 1:1 (that is no margin) to 100:1.
Next, select the trade that you would like to perform. In our case, we will choose ‘Market Buy.’ It shows that we believe the value of the cryptocurrency pair that we are buying will increase in the future.
The next step is to select the cryptocurrency pairs we would like to trade. First, you need to choose the market in the ‘Market’ tab. On BitMEX, the currency that you choose under the ‘Market’ tab is the quote currency. BitMEX has only two currencies for the market, that the US dollar (USD) and Bitcoin (XBT).
Next, we shall select the pair we want to trade as well as the quantity of the trade. Our choice here is XBTUSD, and the quantity is 10. You will realize the trade is valued in US dollars because that is the quote currency.
After having selected the quantity, you can go ahead and choose the margin from the ‘Margin Options’ box. Slide through the options until you reach the desired margin. Our choice is 50:1 or 50x.
