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Bitcoin Margin Trading Guide for New Crypto Traders

Anyone interested in trading crypto should know what Bitcoin margin trading is. As a beginner, the more you know about crypto trading, the easier it can be for you to decide what type of trading you want to opt for and formulate a trading plan accordingly.

Forming a trading plan is crucial, especially for people who are new traders. Knowing which asset to trade, how to trade, where to trade and which strategy to implement can determine how good your trading experience is.

Trading digital assets can be complex and risky as there are several aspects novice traders are not necessarily aware of. Therefore, to make sure the safety risks are minimum and the overall experience goes well, you should know the details of crypto margin trading mentioned below.

This is a brief guide that can be extremely helpful for new traders.

What is Bitcoin Margin Trading?

Margin trading is an advanced trading strategy that is also a high-risk venture. It offers opportunities to people to get good profits but the profits are never guaranteed and the financial losses can be equally huge too. This is why, it is essential to properly understand the concept before you dive into crypto trading, especially if you are inexperienced.

Margin trading crypto allows the traders to place bigger trades as compared to the ones they can place by only using their funds. This is possible because this type of trading allows the traders to borrow funds from the brokers. The borrowed funds are called leverage.

The more you borrow, the bigger your trading positions. However, this does not guarantee that you will get benefits and if the trades don’t go well you can experience a lot of financial loss too.

However, if you know what the trading strategy has to offer and how you can minimize risks then you can have a comparatively better experience of Bitcoin margin trading.

How Much Leverage Can You Get?

Crypto margin trading is supported by several cryptocurrency exchanges in the market. However, the leverage ratio that you can opt for varies from one exchange to another. This means that different platforms offer support to different leverage amount.

The amount of funds you can borrow ranges from 2x to 125x. The more you borrow, the riskier your trade will be. Therefore, you have to be careful while opting for leverage and choosing an exchange as well.

To fully understand how Bitcoin margin trading works let’s take an example.

As a trader you opt for 10x leverage for Bitcoin. In this case, if the price of Bitcoin increases 5%, you are likely to get a profit of 50%. This can be exciting because according to this calculation if the price of BTC increases 10% you will get a double profit of what you invested.

However, this can also work in the opposite if the trades do not go well. In that scenario, you will lose 50% profits if the price of BTC drops 5% and all your funds if its drops 10%.

What is Long Position?

Factors such as short position and long position are a crucial part of the margin trading crypto experience. If you familiarize yourself with these, your chances of having a good experience of trading crypto can increase.

Longing a digital asset, or BTC in this case, is like betting in favor of the asset. If a crypto trader speculates that the price of Bitcoin will increase in the future, they can open a long position and close it instantly once the goal is met.

In this case, if you long for BTC with a 20x leverage you will make 100% profit if the price increases 5%.

What is Short Position?

A short position is the opposite of long position. If a trader speculates that the price of the digital asset will drop in the future they can open a short position. In this case, you will be betting against the digital asset by selling Bitcoin at a high price and buying it back when the price falls.

Which Asset to Margin Trade?

You cannot only opt for Bitcoin margin trading. There are other crypto assets that you can margin trade as well. However, it is crucial to know what kind of cryptocurrency to choose. This is because the crypto space is a volatile place and some digital assets have an even more unpredictable price movement.

Therefore, if you want to margin trade any other crypto asset apart from BTC you need to know that it is only doable with crypto assets that are stable and have high market caps.

Conclusion!

There are several elements about Bitcoin margin trading that you need to know, especially if you are new to the crypto space. The more information you have, the easier the overall experience will become for you. Therefore, as a novice trader you need to have the above-mentioned details.

 

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