Have you heard about bitcoin margin trading? If no, then you are not the only one; there many people who don’t know about it. Margin trading is perfect for traders with less amount of cryptocurrencies. This will help in adding leverage to their investment. This will increase the amount you invested without holding the assets, yet you can alseo invest for example the money got from an online payday loan. In margin trading, there are high chances of risk, this is the reason why it is not suitable for everyone.
For those who don’t know about what bitcoin margin is, this guide will help you. Continue reading!
Bitcoin margin trading allows the users to leverage their bitcoins by borrowing funds. This is to increase their buying power. In simple words, it is a trading method in which you can borrow funds. This method enables you to trade more than you can with your existing funds. It allows you to open a position with leverage.
For instance, you opened a position with 2X leverage. This increased the base assets by 10% and position improved by 20%. In margin trading, lenders offer loans to the traders. This is to help them invest in the more amount of coins. The lenders, on the other hand, can take advantage of the interest on the loan.
Moreover, in few of the exchanges, users offer their coins to the traders while some exchanges provide loan themselves.
How Does It Work?
In bitcoin margin trade, you take a risk of getting an extra reward. This is useful for the traders who think the odds are in their favor.
For instance, you get $10,000 worth of bitcoin with $5,000 borrowing. In this case, the leverage will be 2:1 or 2X. You will pay $5,000 yourself and the rest is borrowed from a lender or exchange. When you sell the coins, you will have to pay the interest for the money you borrowed.
So, irrespective whether the bitcoin goes up or down, you will have to pay the money you borrowed and its fees.
Where to Margin Trade?
There are various exchanges where you can margin trade. Some of the most used are:
Some of the exchanges offer margin trading option to only those traders who meet their criteria. While other exchanges are more flexible and will allow you to margin trade if you are able to cover the trade with funds.
Therefore, bitcoin margin trading is not easy. For being successful at it, you must have comprehensive knowledge of margin trading along with experience. You can margin trade if you have a certain purpose like hedging. Losing bitcoin without borrowing is stressful; however, with borrowed funds and interest, it becomes more nerve-wracking. If you will be speculating on the price of bitcoin, it is advised to do technical analysis of concepts, such as RSI. When you speculate without knowledge, it will be a disaster.
Whene it comes to an interactive platform for leveraged bitcoin trading, this is the best choice.