How does margin trading work?

[lestat2k7]

Hi,

I understand some of the terms but in simple terms how does it work? Basically let's say 1 have 1 BTC and I use 3x leverage, will I be able to trade with 4 BTC?

If so, if I am not wrong, if the total balance goes below 1 BTC, everything will be sold automatically and I lose all. But if I am in profit how much do I get to keep? Are there large fees or percentages taken by the exchange?

I am using poloniex.

So let's say my coin doubled in value after I bought it, so now it's worth 8 BTC (6 BTC if my leverage calculation is wrong), when I sell it, ignoring the trading fee, how much would I keep in profit? Would it be 8 - 3 = 5 BTC?

If so, that would be an amazing gain. I know it's risky but sometimes you see a coin mooning, like BTC and in those cases if you were to buy a lot using margin trading, even after 10% increase wouldn't you end up with a lot of profit?



Thanks in advance.

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[richcorner100]

In my opinion too risky use margin trading for crypto trading because fluctuaction of crypto so high, so will be any possibility your money become zero. In margin trading also need more money to start it. Margin trading only for expert trader who can manage the risk. Use Margin trading is mean the more profit you will get, but the risky also will be more.

[wayancrypto]

Margin trading in crypto trading is same like margin in forex trading, but the fluctuaction of forex market is lower than cryptocurrency. I havebeen try to trade crypto in Simple Fx platform and use leverage but my money lose in afew minutes because the capital not enough to cover minus floating, cause the fluctuaction will be more and more high.

[lestat2k7]

Are there any limits to this though?

Imagine you have 0.01 btc, can you play with 100x and thus trade using 1 btc?

Also I don't get exactly the short and long positions.

When you use leverage, are you still using the regular buy or sell BTC? Then later either sell it high or buy it back low?



Thanks a lot.

[Bolt Brownie]

I think your example is correct, and yes margin trading can give huge profits in crypto because it's so volatile, but like you said it yourself, you can also lose as much, or even more than what you have, if the price drops to much. Normally they liquidate your account, but sometimes if the drop is to big you might lose more than you have.

I think margin trading is to risky overall, but it's even more dangerous in crypto. I like to trade but I wouldn't do margin trade in crypto.

[stronghands4lyfe]

Are there any limits to this though?

Imagine you have 0.01 btc, can you play with 100x and thus trade using 1 btc?

Also I don't get exactly the short and long positions.

When you use leverage, are you still using the regular buy or sell BTC? Then later either sell it high or buy it back low?

Thanks a lot.

No limitations other than exchange ones put on you. Yes you can trade for 1 BTC value using 0.01 BTC, but your range is vastly reduced and is tiny (getting stomped out is easy @100x).

Short=Selling a position
Long=Buying a position

When you go short you are buying the contracts at that price in hopes of selling it later for less, and long is the opposite. You always need buyers on the other side of the contract to take your action, hope that clarifies things.

[Pioneer88]

One expert on margin trading recommended me to long Bitcoin Cash 30x when its price was 425$. Did not believe in him when I saw the total crypto markets were in red. I missed a good chance.
He told me, chances like that come weekly, he suggested to continue long on Bitcoin Cash 5x-10x leverage even when its price is around 500$ now.
Target 1: 519$, target 2: 534, Target 3: 579$. Hold for some days or even weeks. Stop-loss at 479$ and reentrance at 461$. Good luck!

The only place that you can leverage BCC/USD now is at Bitseven. Remeber that BCC/BTC on Bitmex has another outcome.

I do not respond for any of your loss. You own your risk. Never trade with fund that you're not affordable to lose all. However, I welcome any tips or donation if you win big

[Sylvial]

With margin trading, I'll say it's better you don't even know about it than to know, that's the safest way to be safe from being rekt. But for those who dare, try out a lot of demo trading first before going live.

[OlgaFS]

Hi,

I understand some of the terms but in simple terms how does it work? Basically let's say 1 have 1 BTC and I use 3x leverage, will I be able to trade with 4 BTC?

If so, if I am not wrong, if the total balance goes below 1 BTC, everything will be sold automatically and I lose all. But if I am in profit how much do I get to keep? Are there large fees or percentages taken by the exchange?

I am using poloniex.

So let's say my coin doubled in value after I bought it, so now it's worth 8 BTC (6 BTC if my leverage calculation is wrong), when I sell it, ignoring the trading fee, how much would I keep in profit? Would it be 8 - 3 = 5 BTC?

If so, that would be an amazing gain. I know it's risky but sometimes you see a coin mooning, like BTC and in those cases if you were to buy a lot using margin trading, even after 10% increase wouldn't you end up with a lot of profit?



Thanks in advance.

Hi!
You have to remember, when you trade with leverage, the price can kick off your bid if you will not be right and the price will go against you.

[manggis97]

 Margin trading is more risky trading because our balance possible going to zero, leverage make the risk higher.  Although we can earn profit by shorting but avoid margin trading if we are beginner trader.  Because more than 80% of trader loss money in margin trading,  but in spot trading was more trader can make money. 

[Moiyah]

Are there any limits to this though?

Imagine you have 0.01 btc, can you play with 100x and thus trade using 1 btc?

Also I don't get exactly the short and long positions.

When you use leverage, are you still using the regular buy or sell BTC? Then later either sell it high or buy it back low?



Thanks a lot.

From what I have observed, you are not yet ready for actual margin trading. This kind of trading needs a lot of time and patience. When you are using a leverage, the higher the leverage, the higher your chance to loss big money or the higher chance to gain big profit. However, if you are a beginner I suggest you use 5x - 10x leverage.

Short position means you are  selling your position/bitcion at a higher price than the current market.
Long position means you are buying position at a lower price.
Just always think of this :  BUY-LOW, SELL-HIGH.

[kolesozw]

Here is one good introduction article about Leverage Trading. It's about Bitmex, but the concept is the same:

https://hackernoon.com/a-quick-starter-guide-to-using-leveraged-trading-at-bitmex-5383de4cb320

My advice is to start with 2-3x leverage until you get familiar and then keep it under x10.

[BlackPanda]

Margin trading is more risky trading because our balance possible going to zero, leverage make the risk higher.  Although we can earn profit by shorting but avoid margin trading if we are beginner trader.  Because more than 80% of trader loss money in margin trading,  but in spot trading was more trader can make money. 

This depends on our ability, indeed as you say that beginners will be too risky to do this type of trading.
For people who are experienced, this type of trading is quite promising. Again, all this depends on one's ability.
When they have the ability to do so they will get the opportunity to make a profit.

[hipSter]

Basically margin trade means that you work with this formula
leverage * percents_of_changes * contracts_you_bought = price_of_your_position

[bit-freedom]

There is no limits to the profit you can gain. If you buy Bitcoin at 5x and it suddenly pump $1000, you get to keep all the profit. Likewise, you will lost it all if the trade fall below the liquidation price.

[karungbitcoin]

Margin trading use leverage and this leverage has function to maximize the potential profit but also will be make the risk higher. Lets say Bitcoin been going up 10%, and if you make open potition long by leverage 10x you will earn 100% profit but if the price going down 10% you will get margin call or all balance going to zero. With high volatility of crypto ,the level of leverage should be maximum 3x.

[BitcoinTurk]

The method you are talking about is a risky method that I always wonder, but I don't do much research on. In this way, '' Long '' and '' Short '' positions are made and transactions can be done with leverage in imaginary money. The higher the leverage ratio, the higher the risk, the higher the result of high risk, but it should be kept in mind that in case of the smallest mistake, there is a risk of losing the entire amount of money. For this reason, I do not recommend such transactions, but with a serious research, you can specialize in this field and make very good income.