Brief Beginners Guide to Trading Crypto with Leverage
Margin Trading provides a way for traders to profit in declining and flat trending markets, in addition to market rallies. Utilizing leverage to increase a position’s market exposure and profit potential is a renowned method which has been used in traditional fiat market trading for decades. Though, only recently has it been embraced by the crypto community.
But first, what is margin trading?
Margin trading allows traders to open much larger positions than their initial deposit which is multiplied by the amount of leverage applied, eg. a $100 deposit with 100x increases to $1,000. The margin is the amount of a trader’s own funds that’s necessary to open a position with leverage and the minimum amount needed to keep that position from being liquidated.
Where to margin trade?
Bitmex was the first to introduce 100x leverage to bitcoin markets in an impactful way, with other trading platforms only daring to offer lower leverage amounts of up to around 5x tops. As crypto markets and traders have matured, Bitmex is matched with a competitor 100x leverage trading platform, Prime XBT, to meet the increasing demand to utilize up to 100x on more of the top performing crypto assets (BTC, ETH, LTC, EOS, XRP).
Currently, these are the two best crypto trading platforms to access such high leverage and the possibility to trade short. See how the recent bitcoin pump influenced the outcome of traders using these platforms in comparison to that of traditional exchanges in a report here.
Getting Started
It is important to understand that margin trading is riskier than basic trading and the higher the leverage — the higher the risk (and reward). The reason for this; while the leverage increases your total position size, the available margin (which is used as collateral) in your trading account is fractional in proportion, yet the trade is based off the increased position.
For example, if you used 100x leverage, the margin required is only 1% (1:100). So the smaller the margin, the less room there is for movement in the market if it goes in the opposite direction.
For this reason, if you are using leverage for the first time I would suggest these practices in making your first few trades to manage risk. I will also attach a brief tutorial video (provided by PrimeXBT) with each suggestion for further clarification.
1.) Only deposit a small amount into your trading account so that even if you screw up you know it is the most you can lose. Maybe $50-$100?
More info at http://bit.ly/2DyWWFV
