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Margin Trading is not for the faint-hearted. Fortunes are won and lost in a single trade. Traditionally margin trading has been something that was only possible in traditional markets. However, in recent years with Cryptocurrency becoming more popular it was inevitable that it would make the jump.

What Is Margin Trading?

Margin Trading- Risk Vs Reward


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Margin trading is one of the riskiest ways to make money trading. But also one of the most lucrative. Effectively you are borrowing money to use to leverage your position in the market. The margin is the number of funds you put up from your own trading pot. You can then leverage that at different rates depending on which coin you are trading in.

For example, on Bitmex you can trade up to 100x leverage on Bitcoin but only up to 50x on Ethereum. It’s even less for Bitcoin Cash, Tron, and Ripple where you can only leverage up to 20x your position. If your margin is $1000 on a Bitcoin trade with 100x leverage then you’re effectively trading with $100,000. The levels of leverage will depend from exchange to exchange.

This can see traders make vast profits very quickly if a trade goes their way. It can also lead to substantial losses too.

What Exchanges Offer Margin Trading

Several exchanges now offer the opportunity to margin trade in Cryptocurrency. Bitmex and Bitfinex are the two most popular. You can also trade on Poloniex, Huobi and Kraken among others. As I stated earlier each of these exchanges offers different options for leverage.


Margin Trading- Risk Vs Reward

Bitmex offers the most with Bitcoin at 100x. Bitfinex only offers 3.33x but it gives more choice of coins. However,  those of you in the United States aren’t allowed to trade there. Obviously. Your government makes it hard for you to trade anywhere. Poloniex offers you the chance to leverage bitcoin at 2.5x. They also have 10 other Cryptocurrencies you can margin trade with including Dash, Maidsafe and Monero. Kraken lets you leverage up to 5x and they have around 15 other Cryptocurrencies for margin trading as well.

Some of these exchanges require you to do KYC verification before you can get started trading. Once that’s completed and you’re verified you are free to trade.

The Risk


Margin Trading- Risk Vs Reward

Using leverage can make you a ton of profits but it can also leave you with heavy losses. Your whole account can be at risk, not just the amount you put on a trade. It’s like Vegas. The house always wins. If you make a trade and are successful happy days you make profits and they make a % in fees. If you lose you can lose it all and get liquidated. Use your stop losses effectively.

That’s why risk management and strategy is important. At times hubris, desperation to chase losses and greed cloud our judgment. You can make a fortune in margin trading using the leveraging to your advantage but you can also lose one. Believe me having your position liquidated sucks.

Margin trading is best left to more experienced traders. Unless you have good knowledge of trading and charts you are far more likely to lose money than you are to make it. Margin trading can be a great string to your bow for the more knowledgeable traders. It allows you to make immense profits and play in very large positions. If you want to learn more about how to trade check out more from the Low Cap Crypto on our Technical Analysis page.


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