Beginner’s Guide to Margin Trading Crypto
Key points
- Understanding the Meaning of Margin Trading Crypto
Margin trading crypto is the most popular trend in the crypto market. In the last two to three years, Bitcoin margin trading alone has been worth more than $100 billion, every year. This number is quite impressive because the same margin trading in 2014 was worth $10 million. Growth from $10 million to more than $100 billion in just a few years is incredible, showing how well margin trading crypto has been welcomed by traders and crypto enthusiasts.
The question that arises here is, how do traders get benefited from margin trading crypto? As we all know, crypto markets are highly volatile. There are huge price fluctuations in the crypto market, which can be bad, but for crypto traders, it is not a bad thing. Traders can profit from the crypto markets, irrespective of whether it is a Bull market or a Bear market. In simple words, crypto margin trading can be used in both the markets, when the market is going up and when the market is falling.
Understanding the Meaning of Margin Trading Crypto
Margin trading crypto is a simple concept. In this, the traders are given access to more capital. Providing crypto traders with more buying power than they have. By more buying power we mean, traders can buy more crypto tokens than what their actual account balance shows. This provides traders with the power to open far larger positions, which otherwise wouldn’t have been possible without a margin trading option. Consider an example, a trader having a $1000 balance and leverage of 1:5 can open a trade worth $5000, because of the leverage of 5.
Now, you must be confused, where did the extra money come from? The extra money used by the traders in margin trading crypto is borrowed from the exchange itself. Sometimes, additional funds are borrowed by the crypto traders from their peer traders on the exchange.
Now the question that would be haunting you is about leverage, and what it is? Leverage can be referred to as multiplying factor, which allows a crypto trader to increase its trading capital. As seen in the example above, a crypto trader having a 5x leverage will have the power to trade with 5 times the capital than what the trader has in his account. It is for this reason margin trading is also known as ‘leverage trading’.
Margin trading in crypto could help the trader in multiplying his profits quickly with low capital.
Disclaimer: The article is just to provide information and shouldn’t be considered as any financial advice. It is advisable to conduct thorough research before investing in any cryptocurrency.
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