What is Margin Trading in Cryptocurrency?

What is margin trading in cryptocurrency?

When we stepped into the world of cryptocurrency, we did came to know that it is a two sided coin game where on one side there is hell lot of risk and on the other side there are handful of rewards.

A particular person does needs to understand the basics and then only invest if he cares of his hard earned bucks.

Take an example

You invest $1000 and after almost weeks, you get $2000

Isn’t it amazing?

But you do need to understand that your $1000 can be reduced to $500 also. YUP!! Thats the truth!

Today we are about to discuss about one such trading method which included all the equal amount of risks and rewards.

What exactly is margin trading

Margin Trading is nothing but a process of borrowing cryptocurrencies based on the number of existing cryptocurrencies that are already owned in order to buy more and more.

Its is also known as margins or leverage trading. It is an old age method used in traditional market now-a-days.

This concept was first practiced in USA and now the whole world is adapting to the same. It got a boom after the rise of cryptocurrency and has been a main part of the cryptocurrency world too.

The traditional market margin trading is tangled by loads and loads of rules and regulation while the cryptocurrency market margin trading is quite simple and helpful.

Let Me provide an example on this

You want to invest around $1000 in BTC, but you have only $500 with you right now. In Order to get those extra $500, you borrow the same through margin of 2:1 (2x, it means you will give an additional $1 for every dollar you took)

Now imagine the price of BTC suddenly increases by 50%, your investment also did!

So the $1000 you invested is worth $1500. You can now now back back the $500 to the lender and enjoy those extra $500.

This way, Margin trading can be rewarding as well as risky too at the same time. That is the sole reason, one should not try margin trading if you are not aware about the basics and risks.

If you are a complete newbie and have no clear idea, you can use help of delta.exchange in margin trading.

Who are these lenders or investors and why?

I clearly know that you must be thinking who exactly are these individuals or lenders to give their money and why so?

These people are normal brokers or individual who simply act as lenders in terms of providing the money or cryptocurrency in exchange of a fee or a fixed interest rate.

Whenever the portfolio of margin trader becomes weak, the broker immediately turns the status to refund so that the lenders are saved and their principals and interests gets cleared in the first priority itself.

In other case, if the portfolio turns out to be improving or risings, the lenders are given their fee or interest on regular basis which depends on their agreed terms.

I am pretty sure that you guys might be thinking where to trade cryptocurrency on margin basis.

Here are few margin trading crypto exchange facilities.

Crypto exchanges which gives margin trading facility

  1. Bitmex
  2. Whaleclub
  3. Delta Exchange
  4. Kraken

These are few of the best margin trading exchange facilities available on the internet.

Take a note of this important stuff

Margin trading is not at all for noobs as you need to understand the sudden ups and downs of crypto market too.

The golden rule is always invest what you can lose.

This simply means that you need to invest the exact amount that you can lose in the market, no matter whatever the situation maybe.

That was all from my views that I have drafted in this article and I’m sure that I have contributed enough knowledge on margin trading in cryptocurrency market.

You can also help in contributing to this article by filling out the comment box below

If you have got any additional info or any other and better method than marginal trading, do add the same in the comment box below and we would love to add the same in the article.

Do share this article if you found it useful.

Happy Investing!!

 

 

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