A Beginner’s Guide to Learn About Bitcoin Margin Trading

Every new crypto trader needs to learn about Bitcoin margin trading as it is an important concept. The buzz surrounding crypto assets is increasing more and more and attracting more people towards buying and eventually trading them.

People may start off with mainstream investing and then move to more complex functions such as trading, staking and more. However, none of the crypto-related operations are as simple and straightforward as one might think.

For instance, trading crypto is a difficult venture in itself but it can become even more complex if you opt for something like margin trading. At the same time, you should know about all the options that you can avail and learn about such concepts to know how you want to form a trading plan.

Therefore, margin trading Bitcoin for beginners can become easier and less stressful if they familiarize themselves with the following information.

An Overview of Bitcoin Margin Trading

Margin trading is an advanced trading strategy that presents a good opportunity for traders to get big benefits. This trading strategy basically allows the traders to borrow funds from the brokers. The borrowed amount is called leverage and it enables traders to open bigger trading positions as compared to the ones they could if they only used their funds.

However, as a new trader, you need to be wary of margin trading because even though it offers the possibility of high profits, they are never guaranteed and come with high risks as well.

Therefore, margin trading Bitcoin for beginners can become less stressful and complex if they are properly familiar with the concept and know some helpful details as well. Simply knowing the definition of Bitcoin margin trading may not be enough for a new trader, which is why, this brief guide sheds light on all other major details that are important to know.

How Margin Trading Works?

There are numerous crypto exchanges that support margin trading. However, apart from other aspects that differ among these exchanges, another difference is the leverage ratio that is offered by each.

The leverage ratio available in the market is as low as 2x and as high as 101x, but the higher the leverage higher the risks. Therefore, you should be careful while opting for an exchange for margin trading.

As a new margin trader, you need to put some funds in your margin account in order to enter the trade. The amount you enter in your margin account will enable you to borrow leverage on it.

This investment amount also serves as collateral in case the trades do not go in your favor or the price of the asset you invest in drops below a certain price.

In other words, a margin trader who opts for 10x leverage for Ethereum, will get 50% profit if ETH’s price sees a 5% increase. Similarly, the benefit will double if the price of Ethereum goes up by 10%.

However, it is also crucial to keep in mind the downside of this because if the price of the asset drops by 5% or 10% you will lose half or all of your funds, respectively.

Different Margin Trading Positions

This brief guide of margin trading Bitcoin for beginners also highlights the different trading margin positions you can open. As a trader you can open two that are mentioned below with a little more detail.

Long Position

This type of trading position is like betting in favor of a crypto asset’s price. It is opened by traders who believe that the price of an asset they are trading will surge in the future. In such a case if they opt for 20x leverage for a digital currency and the price goes up 5% they end up making 100% profits.

Short Position

This trading position is like betting against the price of a digital currency. Traders who do not believe that the price of an asset will increase in the future open a short position. In this case, if you opt for 20x leverage for a cryptocurrency and its price falls 5% you will get double the profits.

Which Crypto Assets to Trade with Leverage?

There is no shortage of digital assets in the market but they are all associated with a lot of volatility as the prices of the cryptocurrencies can fluctuate quite unexpectedly. Since Bitcoin margin trading is already a risky venture, you should be careful while opting for another digital asset except BTC to trade with leverage.

As a new margin trader you should know that choosing crypto assets with higher market caps for margin trading is more suitable. The coins you choose to trade with leverage need to be stable than others and have strong support from the community too.

Conclusion!

There are numerous concepts like Bitcoin margin trading that new investors and traders need to be mindful of when they step into the crypto space. The crypto space is vast and volatile, therefore, beginners need to take their time and learn as much as possible before they begin.