with leverage has become so popular today on the back of FOREX margin trading.
If you are looking to trade cryptocurrencies but have access to limited capital, it is well worth considering margin trading which has recently taken the cryptocurrency trading world by storm. Margin trading allows you to increase your buying power by borrowing money from a cryptocurrency exchange or brokerage and providing you with the potential for greater profits.
for seasoned traders
Margin trading is an ideal trading tool for seasoned traders, enabling them to open positions that present more potentially-profitable opportunities than they would otherwise have access to. Margin trading was until recently more common in the Forex markets as it was on the whole considered too risky to be utilised in the highly volatile cryptocurrency markets. Nevertheless, while leverage does increase risk and cryptos are in fact more volatile than equity and the Forex markets, crypto traders have become increasingly keen to access this attractive trading strategy and have similar opportunities to increase their profit-potential.
With the potential risk acknowledged, crypto’s volatility can actually be utilised to a traders advantage and deliver significantly larger profits in a much shorter space of time with just a small percentage of the funds invested.
To give an example of how margin and leverage works, margin is the amount of capital that is invested into a trade in proportion to the total position held by utilising leverage. For example, if a trader decided on 200x or 1:200 leverage with an account balance of $200, his position would increase to $20,000 with a margin of just 1%. Hence, any profit made is also multiplied by 200, which is substantially rewarding, especially considering that only $200 of the trader's funds was risked to access such a profitable trade. Also worth noting is that if the trade happens to be unsuccessful, any losses are not multiplied by the leverage. In this case, the most that can be lost is the initial investment i.e. before the leverage was applied.
Hence, the attraction of margin trading crypto with leverage is clearly evident. For those who decide to proceed, the next step will be to choose the best cryptocurrency exchange with leverage. This is not always an easy process as there are many online cryptocurrency exchanges offering leveraged trading. Opting to trade with a crypto trading platform with the highest leverage is not necessarily the best option so several important factors need to be considered when choosing a crypto exchange offering margin trading.
The various exchanges in existence tend to offer different levels of leverage availability with some margin exchanges offering traders up to 100x leverage. The interest rates on offer with leveraged trading are a further aspect that needs to be considered, as depending on the length and leverage of your position, you may end up paying fairly high-interest rates.
Some cryptocurrency exchanges offer variable interest rates with one or two of the main exchanges offering in the region of 3.60% per year or 0.01% per day, which is a good rate for short-term positions.
For those margin traders who use complex order types in order to take profit incrementally or set up stop losses in order to minimize the risk of liquidation, this is something that needs to be taken into consideration as some margin crypto exchanges offer fewer order type options than others.
It is also important to check out the funding and fiat options available on a margin trading platform, so you should ideally look for an exchange that offers both crypto margin trading and fiat deposits, as well as enabling deposits and withdrawals from an account via wire transfer or credit card payments.
Finally, it is worth noting that KYC and AML requirements may affect leverage availability at your crypto exchange of choice. This may depend on your location so you should check which platforms are available in your region.
Crypto margin trading therefore offers a number of advantages and minimizes the threat of exchange hacking incidents, as leveraged trading reduces the amount of capital that must be held by an exchange.
If you are confident that you have fully grasped the cryptocurrency market and are regularly able to make accurate forecasts in terms of price movements, margin trading cryptos can dramatically increase your profits. Therefore, be sure to choose the best margin trading crypto exchange for your needs in order to ensure you are on the right track to success.
Contact us if you want to get started with launching your own cryptocurrency exchange turnkey.