Margin trading guide

Hello everyone!

Today we are going to talk about margin trading.

What is this

What's so great about margin trading is that you can leverage your trade and increase your profit by a lot. Let's start with simple example. So, say you bought 1 BTC at 7k and sold it at 8k. What is your profit? $1000, right! This can be a good profit, however if you were on margin x10, you would made $10,000. Cause, remember - you borrowing x10 of your money from exchange, so your position is 10 times larger. But how is that working? Look, in a nutshell, the exchange that gives you money never risk anything always securing its risk. When you on x10 leverage, your actual (real) position is just 10% of that, the rest 90% belongs to exchange. You just borrowed it for some time. Here, it is important to understand that you not only increasing your position by x10, you also increasing your risk x10. What does it mean? It means that if BTC will make a 10% move in a opposite direction of your trade - you lose everything. Cause, remember, you only own 10% of that position, so you can lose only what is yours, and never borrowed money.

Example: BTC hit $10k and you believe that it needs a correction, so you bet it will go down. So, you open a short (sell) position on x10 leverage. Bitcoin start dipping to 9500, you happy cause you already +50% (cause 10k - 9500 = 500 (5% of 10k) x 10 = 50%) in profits, but all of a sudden there are news coming out that China welcomes all crypto and BTC bounces up to $11000 in a sick pump. Well, guess what happens? You got liquidated. Cause $11000 is your liquidation price (cause $11k = $10k - your entry + $1k is all you could risk i.e. $1k is 10% x10 = 100%).

Another example: You feel like BTC reached bottom at $7k and the only way for it is up now. Imagine, you have only 0,1 BTC available or $700, which is not that much. So, even if BTC will make an incredible pump to $10k you will only make $300. So, you open long (buy) position using leverage to maximize your profit. You are doing x5 long. Which means you borrow x5 of your money from exchange and now you have 0.5 BTC. When BTC reaches $10,000 - you make $1500 ($300 x 5). Or $3000 if you used x10. Here, note that using x5 allows you to play it in a more safe fashion and your margin of error is only 20%. So, if you open long at $7000, BTC can dip down to $5600 and you still will be alright. So, on x5 margin you have $1400 swing in a opposite direction before you get liquidated.

Risk

ATTENTION!

You should always keep in mind that "margin trading" is the only way to actually lose your money, and I mean really lose it. It is quite different than what you used to feel about losing, cause we often say something like "Damn, ever since i bought that TRX at 1400 sat - it is going down, 700 sat already! Man, I am losing money". Well, you not actually losing money cause it is only temporary, and once TRX will start to pump and comes back at 1400 - boom, you are not losing money anymore, you can sell it at break even or wait till it goes up higher and sell at profit. So, you never actually lost money. It was just temporary devaluation.

But margin trading is different, and since you borrow money - you have to return them, if you the trade you got in is not going in your favour - you lose money and exchange takes your collateral too (what you put initially).

So, take it seriously and educate yourself first. Don't be lazy and instead of watching netflix - go and spend couple of evenings and dive into margin theory. Once you got the basics, you can start to trade with some small amounts on x2, x3, x5 leverage. Sometimes, when you are very sure about movement - even x10.

Live examples

Now, I will show you some real examples from today.

Long

So, I opened the long position at $7545 and closed it at $8280. That would be about 9.8% of profit without any margin. But with margin, it is 98%

Short

I opened short (sell) position on BTC at $8750

Bitcoin is traded on $8370 (as I am writing this article) which is down by -5.4%. Not much, but using x10 leverage I already made 54%. I don't have any specific target, I am riding it while I am awake, will probably close it when go to bed or set a market order in advance if I still see $7500 area as a target which would give me a bit more than 100% of profit since entry at $8750.

So, in 1 day I made around 140% of ROI on BTC alone.

What's cool is that margin allows you to earn money on the downside, when market is crashing. That's why traders always make money, on the pumps and on the dumps. There is no difference which way to trade. If you put enough time and work into this and practise margin trading, you can make money all the time and never worry about market cycles and price movements. Just remember the risk management and rational thinking, don't be too greedy as well.

Where I can use margin trading?

I am using Bitmex cause it is specifically designed for margin trading. It has good big volume and a lot of tools needed for a margin trading. You can use from x1 up to x100 leverage (suicide level). I recommend start with x3 - x5 to get a feeling before going more (x10).

It has simple interface and supports a lot of languages. Registration is fairly simply, deposits and withdrawals work perfectly!

You can use my ref.link and we both get 10% bonus (10% off trading fees for the next 6 months) Go and register now!

https://www.bitmex.com/register/UAeDPE

Or you can use non ref link without bonus

https://www.bitmex.com

Also, there is margin trading on Bitfinex and couple of other exchanges, but Bitmex and Bitfinex are the largest and most common used.

p.s. There is good way to practise if you don't feel you are ready for margin here:

https://testnet.bitmex.com

This is sandbox of Bitmex and you can practise your skills without using real money. Don't stay long there though, you should start to use real bitmex and money in order to understand the risks and feel the game.

Make sure to spend some time and look around on Bitmex. It has a lot of guides, references, explanations and good F.A.Q. section. You will not understand a word at first, but give it a time and try again. Couple of times reading should work and you will get the idea. Go to references tab and you should see this on the left side: