What is margin trading?

[metalbean]

Am new to doing leverage and margin. Can someone explain in plain english?

For example, does the exchange drop or execute if my leverage reaches the maximum fund I have in the exchange? If so why would a trader (me) want to trade margin when I can just use an open order to predict the changes with the funds I actually have and buy.

It's probably a super simple question, so thanks in advance

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[DaMut]

Am new to doing leverage and margin. Can someone explain in plain english?

For example, does the exchange drop or execute if my leverage reaches the maximum fund I have in the exchange? If so why would a trader (me) want to trade margin when I can just use an open order to predict the changes with the funds I actually have and buy.

It's probably a super simple question, so thanks in advance

leverage = loan
Margin = Position ( Selling or Buying ) or ( Holding or Shorting )

Leverage,or we called it Loan that mean you can borrow bitcoin/altcoin in their exchanger based on their term,from what i can see many exchanger can do 1-2,5x Leverage ( that mean 1-2,5x from your initial amount[capital] ) some of them can do 1-100x Leverage ( that mean 1-100x from your initial amount[capital]).
Margin/Position in reality actually same like Leverage,we're borrowing bitcoin/altcoin,
Long that mean holding and Short that mean Selling.
Long/Holding,right now bitcoin price around 2000$ and you have a money on exchanger around 4000$ that mean 2BTC,you use Margin Long 2,5 and you can use 10000$/5BTC and Bitcoin price up to 2100$.
you used 2,5x Margin Long that mean you have 5BTC and price up 100$ that mean you get profit 100$x5=500$
Margin Sell/Sell,same like Long but you get profit if the price goes down

[Xavofat]

Margin trading is just lending crypto from the exchange (or users who lend it via the exchange) and using it to trade.

For example you are bearish on ETH in the ETH/BTC pair, so you lend ETH and sell it for BTC.  To pay back your loan you just need the amount of ETH that you were lent (plus interest), so if the price drops like you predicted then you net a profit by buying back ETH to pay the loan back at a reduced price.

By selling the ETH that you were lent you are opening a short position.  When you give the loan back, you are closing your position.

Selling on margin is a good idea if you feel that the price of something is going to drop but you don't hold it already.  For example, you see that ETH has just risen too sharply and you believe that it's overbought, so that's why you open a short position on it.

It's also important to note that by shorting ETH in the ETH/BTC pair, you are also going long on BTC, because you are buying it during that trade.

You could do the same the other way round if you already held ETH and you were bullish on it.

[mrBTCman]

Margin trading is based on money borrowing, that means if you do everything right - your profit is much bigger than it would have been without borrowed funds. When researching about it, try reading articles posted by the exchanges that provide such services. Because there you can find not only the explanation of what it is but also a guide on how to do it.

[jerowacik]

Margin in the trading world is the nominal distance between when you buy a coin and when selling the coin.
There are so-called profit margins and also margin losses. Each is the result of how we take the right action and not.

[starblocks]

Its when you short or long a market to get a return on what you predict the price move will be if it goes your way

I'm curious if many people in this thread margin trade and if so where?

[cointabo]

Guide on trading cryptocurrencies in general:
https://docs.google.com/document/d/1YgB5Jf1jbm8OzT9372ZqCkBnTQui6gkx0SICKq61Pv0/edit#

Amazing guide on margin trading on poloniex:
https://docs.google.com/document/d/1ex37eOVMCWJRHXLN6KLQcrMPsUbQw15jAFrLeO1aSUk/edit?usp=sharing

[flippener]

Guide on trading cryptocurrencies in general:
https://docs.google.com/document/d/1YgB5Jf1jbm8OzT9372ZqCkBnTQui6gkx0SICKq61Pv0/edit#

Amazing guide on margin trading on poloniex:
https://docs.google.com/document/d/1ex37eOVMCWJRHXLN6KLQcrMPsUbQw15jAFrLeO1aSUk/edit?usp=sharing

Thanks for the links, time I did some reading

[btclady]

Hi,
I can just give you the advice to be very careful with margin trading. It's the most advanced tool traders can use to reach higher gains. When you trade with leverage (btc borrowed by other traders on the platform), you can earn a multiplied factor of your own fund, because you trade with their BTC as if it where yours. It's of course a big difference if you trade with 0.5 BTC or with 5 BTC for instance. Let's say your target is to take profit when price goes 8% higher. Usually you'd get only 8% of 0.5 BTC on top, but with the leverage of this example you'd get 8% of 5 BTC on top. Of course you must give back the lended BTC with some commission for the lender on top, but the rest of the profit of e.g. 8% x 5 BTC is yours. There are brokers that offer up to 100x leverage. I personally would be very careful with that, because if price goes against your position you can just lose as much more as you would have been able to gain. That's the other side of  margin trading, so as a beginner I would avoid it or at least try it with small leverage. 2x to 3x. Here is a list of brokers and their leverage amounts: http://www.bitcointradingsites.net/features/leverage/

[bit-freedom]

True, margin trading has much more risks. The position will be closed if the price falls to certain level. In this case, you lost the chance to hold.

[The Sceptical Chymist]

Its when you short or long a market to get a return on what you predict the price move will be if it goes your way

I'm curious if many people in this thread margin trade and if so where?

Dude, that's not the definition of margin trading.   Be silent if you don't know what you're saying.

OP you got the definition:  It's borrowing to increase your position.   And I would echo the noob above.  Be extremely careful when trading on margin.  Small and large traders alike have gotten into serious trouble with margin.  Read about the stock market crash of 1929 if you haven't already.   Lots of havoc got wreaked because of margin calls and whatnot.  You can lose way more than by simple trading out of your own pocket.