Bitcoin Margin Trading is a type of transaction that allows traders to open positions with leverage. For example, you open a margin position with leverage 2:1 and risk 10% of the fund owned. If the price moves according to the order, then the profit can be 20% of 2 times, and vice versa if the price is against the direction of the order. Margin trading can occur due to a loan system. Lenders can provide loans to transfer, so they can invest in larger amounts of coins. On the other hand, lenders benefit from the interest determined. Margin trading can also be used for the two-way transaction, both in short(sell) and long (buy) positions. The main disadvantage of this trading model is that crypto coins must be placed in the stock wallet, which is usually less secure than the offline wallet.

Margin Trading Costs and Risks

Costs in margin trading interest for borrowed coins (whether to the other exchange or to other users), and fees for opening orders on the exchange. Because of the opportunity to get more profits, the risk of loss also higher

However, traders need not worry that they will bear the amount of risk that is greater than the initial capital, simply because he also deals with loan funds. In this trading model, there is a term, namely that value of liquidation. The maximum amount that becomes the limit of loss from a trader's position is the value of liquidation. In other words, the value of liquidation is the limit value, which when reached will trigger the brokerage system or exchange to close the trader's position. This is intended so that traders do not bear losses greater than their capital. In forex trading, the value of liquidation can be equated with stop out.

Tips on Margin Trading on the Bitcoin Market:

  1. Risk Management: When conducting margin trading, clear risk management rules are mandatory. Be careful of excessive greed, given the risk.
  2. Watch carefully: Crypto coins are assets with extreme volatility. Trading cryptocurrencies with Margin can double the risk. That can happen when leverage is high enough, so the value of liquidation becomes more easily achieved. In addition, even though the daily costs in Margin Trading are not too large, the interest on these loans can be significant in the long run.
Author's Bio: 

I'm Mansi Dandekar, I am sharing an article about Introduction to Bitcoin Margin Trading. Here is more information on the Forex Trading Tips and Free Currency Tips.