What is margin trading?
Margin trading in simple words, it is a loan. It allows you to buy more than you´d be able to afford by borrowing money from a broker.
Leverage (margin) trading requires traders and investors to have a Margin Account. This is different from a regular account. Therefore, by law a broker must obtain the trader´s signature. The margin account may be a part of the trader´s regular account or an account that is completely set apart.
This type of trading is becoming a hot topic in the crypto industry. There are several new crypto exchanges emerging with the new trend. However, this is a risky market as it is, so one must know what he or she is doing. In other words, do not just fall over this head first.
Leveraging is always a risk, added to crypto risks let’s just say it gets extra risky. This is for knowledgeable traders ONLY, and most likely for moderate and aggressive investor profiles.
To learn more about Margin trading you might want to read “What is Margin (Leverage) Trading? DO NOT MARGIN TRADE CRYPTOS (YET)!”
Although not all crypto exchanges offer margin trading, there are some notorious exchanges you can count on. Such which have been around for a while, as picking a trustworthy exchange is vital; so here they are:
BitMEX is the largest crypto margin exchange well-known due to its variety of assets offered in margin trading. The exchange offers up to 100x leverages, which means with 1BTC you can get up to 100 BTCs. However, please understand how dangerous this is. 100x fold is a whole lot to win but also a whole lot to lose.
When a liquidated order cannot be executed in the market, auto-deleveraging is used at BitMEX. This is a rare procedure that reduces leveraged positions.
- Multiple cryptocurrencies offered
- Relaxed verification process
- Hard to use interface
- No fiat
- Not available in the US.
Poloniex is one of the best-known names in the crypto industry, it was one of the first crypto exchanges to start offering crypto margin trading.
Margin trading at Poloniex is HIGH RISK, just as with any other exchange. If you´re interested in margin trading at this exchange, make sure to check out their terms.
The exchange has recently lowered their trading fees for market makers to 0.08% and 0.2% for market takers. Their margin trading features are available for most countries except the U.S., Germany, Pakistan, and China.
- Large altcoin selection
- Low trading fees
- Low liquidity for some assets
- KYC is a strict requirement for all users
Kraken, different from the first two, this is a U.S. based crypto margin exchange, and it was launched in 2011 making it the oldest top crypto exchange.
Margin trading is only available at Kraken for accounts with extensive verification, which has reached at least “starter” level.
Kraken has an untouched reputation, and it is available in almost every nation worldwide, making a great option to get started.
- Up to 5x leverage for some assets
- Great liquidity for most assets
- Poor customer service
- Few crypto pairs
PROS AND CONS OF MARGIN TRADING
- One can short asset: You can certainly benefit from shorting assets with margin trading, which means you can profit even if the price drops.
- Structured trades: Some say that once you get the hang of it, you will have generated such structured trades that may look like option trades.
- Large Losses: losing with margin can be disastrous, you can win big, but it can also magnify your losses.
- Interest and rollover rates: these rates could eat up your profits, so you must be aware of how these rates will work and how to still make money while paying for them.
- Greater return: Not much to say about this, leveraged returns is what margin is all about.
The benefits of margin trading are visible when used by savvy and experienced traders.
Leveraging can turn small gains into extraordinary profits.
But we must warn people that if you find yourself risking money to pay your bills and debts then this business could lead you to terrible situations, other than the ones you may be trying to make up for.
There are other crypto margin exchanges you can search for, but I have selected 3 top exchanges in the market at the moment, but you can certainly search for others to fit your profile needs.
There are several crypto margin trading exchanges out there, you should perform your own research and find your perfect match. Whichever you choose, make sure to read their terms and conditions thoughtfully.
And if you are a Binance lover, speculators say that Binance, the biggest cryptocurrency exchange by volume at the moment as you may know, will soon add the margin trading feature. Follow CZ to stay tuned!
And this is all for today, I hope this has been helpful.
Please feel free to share your thoughts in the comment section, and if you have any experience with margin trading share your recommendations.
Disclaimer: Our team works hard to bring you the best content in the cryptocurrency market, but it is only our point of view and not legal advice, and may be divergent from other opinions, so please do not make any decisions without concluding studies of your own to understand the profit possibilities and uncertainties involved at your own risk.