Margin trading and liquidation

[emd023]

Hi everyone. I am having trouble understanding how the margin trading on Coinbase works. If I deposited $10,000, Coinbase gives me another $10,000 to use for trading. What I dont understand is how/when I can become liquidated and what happens if I do. For example, if I buy in today at the current Bitcoin price with $20,000 (using my $10,000 and their $10,000) at what point will I become liquidated? How can I prevent this? Where would I have to set my stop loss to prevent this? I can't seem to find any information on this. Thanks!

[1715159748]

1715159748

[1715159748]

1715159748

[1715159748]

1715159748

[jackg]

I haven't used coinbase for margin trading but they probably work a bit like binance.

You take out a loan of $10,000 on your current $10,000 and your funds will be liequidated normally probably a bit above half of the actual value (I.E if you put $10,000 in and btc price halves then you'll be liquidated). You'll likely be given a warning email just before you're about to be liquidated and told to add funds to your account. If you are about to be liquidated, you can either pull out whatever you have left or try to add margin to bring up your liquidation and bankruptcy price.


I wouldn't suggest leverage trading without reading up on it, you can easily have everything liquidated.

[avikz]

Hi everyone. I am having trouble understanding how the margin trading on Coinbase works. If I deposited $10,000, Coinbase gives me another $10,000 to use for trading. What I dont understand is how/when I can become liquidated and what happens if I do. For example, if I buy in today at the current Bitcoin price with $20,000 (using my $10,000 and their $10,000) at what point will I become liquidated? How can I prevent this? Where would I have to set my stop loss to prevent this? I can't seem to find any information on this. Thanks!

Margin trading is very simple to understand. Just view the below video,

https://youtu.be/tdcVlpViJiA

It's well explained in the video, both the sunny side and the flip side. It is the most comprehensive explanation on margin trading in general.

For your question about liquidation point - your trade will be liquidated as soon as the loss reaches $10,000. For the above example, if you buy bitcoin at $8000 with 20 grand. Your trade will be automatically liquidated if the bitcoin price reaches to $4000.

Hope this helps!

[rexxarofmoknathal]

Basically you will get liquidated if your true balance falls below the maintenance margin threshold. Most exchanges set this at about 0.5% of the total order size, or half of the maximum margin.

For example, if you've got $1,000, but you use 100x leverage to open a position of $100k, then your position will be liquidated if it falls to 0.5% of $1,000=$5.

This can happen extremely quickly while trading on leverage.

[leyton11]

Hi everyone. I am having trouble understanding how the margin trading on Coinbase works. If I deposited $10,000, Coinbase gives me another $10,000 to use for trading. What I dont understand is how/when I can become liquidated and what happens if I do. For example, if I buy in today at the current Bitcoin price with $20,000 (using my $10,000 and their $10,000) at what point will I become liquidated? How can I prevent this? Where would I have to set my stop loss to prevent this? I can't seem to find any information on this. Thanks!

you will be liquidated when your trade is continuously losing and interest will take all of your principal amount. At Binance they do the same thing, they lend you money to trade and they will take your interest every month. Therefore, you should also consider in borrowing, because trading margin is not easy. According to statistics, more than 95% of traders failed in the first 2 years and lost a lot of money. That's the number in the house's plan and that's why they lend so much money. Be careful and consider carefully, $ 10k is not a small amount of money.

[buwaytress]

Just take the advice, buddy. Don't margin trade until you understand it. Even for me, understanding it becomes much harder at non standard leverage (like 17:1 as I've seen some people do in forex!).

Don't know how Coinbase works but most margin platforms have a detailed dashboard which gives you several numbers and allows you to monitor how well or how badly your trades are doing. There are also tools available out there that will calculate your stop loss at the amount of capital you're willing to risk on your leverage. That's probably best for you even once you understand leverage.

And again, all depends on the platform, like rexxarofmoknathal explains, most exchanges force you to liquidate at 50% of your max margin. At 100x leverage, this only means a 0.5% drop in price! No surprise why traders lose money all the time on 100x!

[beerlover]

Well, it was explained very clearly on how you could do margin trading and leverage trading and how you could lose all of your money if you are liquidated and thanks for all the people who have helped to explain it better. I would like to also add that, it is quite risky and we are talking about literally being at zero in seconds type of scary thing here and not some small drop.

You could lose ALL your money in matter of seconds, not even minutes because bitcoin could drop or go up in few seconds that could hurt your economy. Leveraging is something dangerous and nobody who doesn't know about margin and leverage and liquidation enough should do it and from the question itself it is obvious that you are not all that very well versed so it would be extra dangerous for you.

[Ems439]

Hello,just asking the deffirent of margin trading?and the basic trade...I don't understand really the margin trade..thanks in advance for the answer:)

[omega33]

In terms of margin trading, I can suggest these guys - Margin Whales (https://t.me/marginwhales). Personally, I made +50% over one month.

Check it out one of their trades

[emd023]

Hi everyone. I am having trouble understanding how the margin trading on Coinbase works. If I deposited $10,000, Coinbase gives me another $10,000 to use for trading. What I dont understand is how/when I can become liquidated and what happens if I do. For example, if I buy in today at the current Bitcoin price with $20,000 (using my $10,000 and their $10,000) at what point will I become liquidated? How can I prevent this? Where would I have to set my stop loss to prevent this? I can't seem to find any information on this. Thanks!

Margin trading is very simple to understand. Just view the below video,

https://youtu.be/tdcVlpViJiA

It's well explained in the video, both the sunny side and the flip side. It is the most comprehensive explanation on margin trading in general.

For your question about liquidation point - your trade will be liquidated as soon as the loss reaches $10,000. For the above example, if you buy bitcoin at $8000 with 20 grand. Your trade will be automatically liquidated if the bitcoin price reaches to $4000.

Hope this helps!

Thanks! Another question. If I set my stop loss at $7000, then I cant be liquidated, correct? So what exactly is the drawback of margin trading? Im guessing the increased fees?

[emd023]

Hi everyone. I am having trouble understanding how the margin trading on Coinbase works. If I deposited $10,000, Coinbase gives me another $10,000 to use for trading. What I dont understand is how/when I can become liquidated and what happens if I do. For example, if I buy in today at the current Bitcoin price with $20,000 (using my $10,000 and their $10,000) at what point will I become liquidated? How can I prevent this? Where would I have to set my stop loss to prevent this? I can't seem to find any information on this. Thanks!

you will be liquidated when your trade is continuously losing and interest will take all of your principal amount. At Binance they do the same thing, they lend you money to trade and they will take your interest every month. Therefore, you should also consider in borrowing, because trading margin is not easy. According to statistics, more than 95% of traders failed in the first 2 years and lost a lot of money. That's the number in the house's plan and that's why they lend so much money. Be careful and consider carefully, $ 10k is not a small amount of money.

So borrowing is not the same thing as leverage trading? The reason I ask is because i have the margin option on Coinbase, however, it only lets me borrow 2x of my total assets. Coinbase says that they offer 3x, which I cant seem to find anywhere.