One of the best way to earn money in the crypto world is undoubtedly by trading cryptocurrencies.
Now with the burgeoning cryptocurrency, it is, therefore, a challenge for average investors to survive with limited cryptocurrencies.
Well, if you are among those who are looking to get most out of it than Margin Trading is quite a useful option. The Margin Trading allows you to borrow money to buy more BTC to get the maximum profit.
So, before moving further let’s start by understanding what margin trading is and how it is beneficial?
What is Margin trading?
The term Margin trading means trading cryptocurrencies using borrowed funds.
In simple words, margin trading is an act of “Trader borrowing money from a broker or a crypto exchange to acquire more assets than they are actually able too.
Traders can fundamentally borrow up to 50% of the value of an asset.
The Margin Trading involves borrowing capital at relatively higher interest rates from the cryptocurrency exchange so you can access increased leverage.
Now, there are two types of Margin Trading:
In Short Margin Trading investors bets on the assets which they think will depreciate in the future.
2. Long Trading
In Long Margin Trading the investors are seeking to purchase assets that they think might will increase in value.
Note: Both the trading are done on credit from the exchange, but with different goals keeping in mind.
Benefits of Margin Trading
1. Flexibility to Payback borrowed money on the trader’s preferred schedule.
2. Potential Tax Advantages.
3. It allows traders to gain more profit from Price Declines with the help of “Short Selling.”
4. The Margin Trading can pursue advanced trading strategies.
How Does Margin Trading Works?
Margin Traders must be careful to pay attention to their maintenance margin which means the minimum account balance that must be maintained.
If the margin traders go below the level, then the lender or broker has the right to require the deposit of additional funds, or the sale of stock to satisfy the terms of the account.
This overall process comes under the Margin Call.
Moreover, the essential benefit of trading on margin is the potential for higher profits.
Now, by borrowing money, a trader can take a more significant position and thus realizes the greater gains.
The traders can even leverage their existing holdings to increase the size of their investments.
Fundamentally, Margin Trading comes with the same risks as any form of debt, including interest charges as well as fees.
Apart from this, if the market turns in an unfavorable direction, then the margin trading can increase the losses, and the trader, therefore, would otherwise suffer.
Furthermore, if the value of the assets being used as ‘Collateral’ for a ‘Margin Loan’ decline below maintenance requirements, a trader risks facing a margin call.
Now, it’s important to know or understand the distinction between leverage as well as margin.
Leverage regarding Margin Trading is the additional buying power available to only those who have Margin Accounts. Leverage allows traders to enter higher positions than they usually have and it is primarily expressed as a Ratio.
Now, if you are looking to borrow USD to buy more Bitcoin and gain more substantial profits than here, we have featured some of the best Margin Trading Crypto Exchanges platforms.
There are a number of crypto exchanges currently available in the market. However, we have only mentioned the top 3 of them. So, here we go.
Undoubtedly, BitMEX is one of the best Margin Trading Crypto Exchanges in the market. BitMEX expedited margin trading for cryptocurrencies and gained a lot of respect in the crypto world in a shorter period.
The BitMEX consists of a team of experienced developers, economists as well as high-frequency algorithm traders, which inevitably makes BitFEX a relatable product. Currently, BitMEX offers a margin trading for 6 cryptocurrencies including Bitcoin Margin Trades one of the most famous.
Poloniex is radically one of the pioneer exchanges in the crypto world.
Poloniex is founded by Tristan D’Agosta and is based on the US and has been operational since 2014. Moreover, this exchange is currently owned by “Circle,” an Internet Financial Limited.
Apart from all these things Poloniex offers normal trading accounts for day traders and also offers margin trading features for advanced users. In the crypto world, only Poloniex can leverage up to 2.5X in the BTC.
Kraken is based out of San Francisco and is one of the largest Bitcoin and Altcoin exchanges in the USA.
Moreover, Kraken is the most significant exchange regarding EUR Volume where anyone can register using the “Email ID” and can start trading BTC after proper “KYC Verification.”
Typically, it takes up to 7 days to get verified from Kraken after which you can deal with fiat currencies such as USD, EUR, GBP, as well as CAD.
The Kraken provides the benefit of different leverage options which it offers for different pairs.
Trading of Bitcoin on Margin can be highly profitable; however, you need to keep in mind that it is a highly risky venture.
Moreover, if a trader successfully determines the price trends on the cryptocurrency market, then he/she will find the margin trading a game changer.
Now, those who do merely day trade or margin trade, never keep your money or cryptocurrencies on these exchanges as it is not a safe practice.
Now if we talk about the exchanges which we have mentioned above, then it provides an extra bit of security features including 2-FA Authentication.
Do you trade in Cryptocurrencies? Tell us about your experience with Margin Trading.
Let’s discuss trade or margin trade cryptocurrencies in the comment section.…