A Brief Bitcoin Margin Trading Guide for Beginners

A vast audience in the world is interested in Bitcoin margin trading. It is a popular trading strategy but it may not be as simple to adopt as one might think.

Even though this is a well-known crypto trading strategy, there are several aspects that need to be considered before any novice party dives into it. As a beginner, you need to know the basics of the trading strategy, possible risks and more so you can form a proper trading plan and move forward accordingly.

Having proper information beforehand is also one of the best ways to minimize the security risks posed by the crypto space.

Therefore, if you are looking to start crypto margin trading then you need to know the details mentioned below first.

Understanding the Concept of Bitcoin Margin Trading

Margin trading or leverage trading is a trading strategy that allows crypto traders to borrow funds from brokers. The amount borrowed by the traders is called leverage and varies from one exchange to another.

The purpose of leverage is to enable people to place bigger trades than they would have been able to do so if they only used their funds. There are crypto platforms in the market that offer leverage as low as 2x and as high as 250x.

Therefore, if you want to opt for this trading strategy you need to consider the leverage ratio offered by different exchanges before you choose one platform.

Placing bigger trades means that you can either enjoy big profits or go through big financial losses. As a beginner, you should also know that the profits are never guaranteed in crypto trading, regardless of the trading strategy you opt for.

Therefore, margin trading crypto offers a good opportunity to crypto traders to get profits but it also comes with the possibility of losing the funds and facing liquidation.

Taking an Example

To fully understand the concept of Bitcoin margin trading we can consider an example.

Let us suppose that as a crypto trader you opt for 10x leverage for BTC. This means that if the price of the flagship crypto asset increases 5% you will get a profit of 50%. Considering this case, your profit will be the double of your initial investment if the price of BTC goes up 10%.

However, the risk is not eliminated but can be increased as you increase the leverage ratio you go for. This would mean that if the price of the crypto king drops 5% you will lose 50% of your initial investment and the loss will only increase as the price of BTC drops.

Simply put, higher leverage means higher risk but also higher reward. This is why, it is important that you take your time and develop a proper understanding of the concept before you move forward with Bitcoin margin trading.

Which Digital Assets Can You Margin Trade?

The vast number of cryptocurrency exchanges in the market that support crypto margin trading also specify the digital currencies you can margin trade. However, for an efficient and improved overall experience you need to know which crypto asset qualifies for margin trading. This can help you learn more about the crypto space and make it easier to choose an asset to invest in.

Since the crypto space is known to be quite volatile the price movements seen for some cryptocurrencies are more unpredictable than others.

Therefore, you can only margin trade the digital assets that have a higher market cap and are more stable than others.

Different Margin Trading Positions

There are two different types of Bitcoin margin trading positions in the market that are namely:

  • Long Position
  • Short Position

The long position is opted for when the trader believes the price of the digital asset will surge in the future. In such a case, they open a long position.

To understand the concept more clearly you can take an example where you long 20x leverage for ETH. Now if the price of the altcoin goes up 5% you will get a 100%.

On the other hand, the short position is opted for by people who suspect that the price of the digital asset will drop in the future. This means that you short sell ETH with 20x leverage your profit will double if the price of the altcoin drops 5%.

Suitable Platforms to Consider

If you are interested in margin trading crypto then you also need to know which popular exchanges are possibly suitable options for you to consider. If you have an idea of the platforms you can choose, you can take a look at their features in detail and make an informed decision.

Here are some of the best platforms for Bitcoin margin trading.

  • Binance Futures
  • Bybit
  • Phemex
  • PrimeXBT

Conclusion!

There are several aspects you need to know before you start Bitcoin margin trading. As a beginner, if you are familiar with the details mentioned above then trading crypto can be easier and less complicated for you.

By sophie Jay

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