Margin (leverage) trading is basically betting on the amount that you have borrowed. It’s not your money you’re betting it on and the most important thing is to be really careful about the trades you make. Margin trading is commonly used by professional traders who are aware of concepts like Risk Management and technical analysis. Margin trading is not suitable for beginners. You should have at least a few months of trading experience before attempting margin trading. Don’t jump into it without understanding how it works.
Short – How to Win Bets Bitcoin Price Will Fall
In margin trading, you are essentially exchanging contracts with other people using the platform. So if you go short you are exchanging a contract with someone who is long and if you go long you are exchanging someone short for Bitcoin. Margin is the amount that you decide to borrow. The higher the margin you choose, the higher the risk.
Margin can range from 2x to 100x depending on the services that the exchanges you choose offer. As you increase the leverage you want to trade, the more money you borrow, the greater your risk of being liquidated.
The liquidation price is basically the price at which your account balance is completely liquidated. Your liquidation price is given to you before you start trading and the entire duration of your trade so you can track it throughout the trade.
You never have to worry about calculating the liquidation price because almost all brokers that allow margin trading have the ability to display the liquidation price in real time.
The basic principle that margin trading works on is based on long and short. A Short position bets the coin price will fall and a Long position bets the coin price will increase.
When you are short, the liquidation price will be higher than the market price, and when you are long, the liquidation price will be lower than the market price.
Risks of Shorting Bitcoin and Other Cryptocurrencies
Earn with margin trading is a double-edged sword. It is very profitable but there is a lot of risk involved. However, you can minimize your risk and maximize your rewards by incorporating a few techniques in your daily trading activities.
Scaling in and out of your position is one of the most useful techniques for maximizing profits and minimizing the risk of loss. Layering your transactions instead of depending on a single transaction is the way to go.
For example, you are trading Bitcoin for $2,000 and want to take a long position at $10,000. The current position is $10,500. Instead of looking at the chart all day and trying to time it to get closest to that $10,000, you can simply place multiple entry points on the way down.
Like placing $500 at $10,400, $500 at $10,300, $500 at $10,200 and $500 at $10,100 in case the price drops. All entry points may not be filled today as the price can only reach $10,400 but you will be at a much better entry point with the capital in the trade. Exit positions are the opposite.
Go Long, Go Short or Go De
Buying long and selling short at the same time is a strategy that professional traders use to minimize losses. In this case, you need to have two accounts in an exchange where you will be margin trading.
That’s not a problem as at most exchanges today you can have multiple accounts without providing personal information. You would set up a long above the potential breakout on this account and set up a short below the potential breakout. This way, you are setting yourself up for a big advantage in either direction of the breakout.
Understanding the services an broker offers can help you track your leveraged trades more effectively. Stop loss, using market orders and limit orders are among them.
For the majority of trades, you will want to use limit orders. But there are times when you should use market orders. Using a stop loss is highly recommended when trading coins, especially when you are not near a computer or have time to monitor the markets.
How to trade crypto margin with limited loss and unlimited profit
Where is it possible to short Bitcoin?
Bitmex has long been a trusted platform for margin trading. If you are a new trader and want to participate in leveraged trading, you should choose this broker.
One big advantage of Bitmex is that you can leverage your trades with the capital you want. 2x-10x is the leverage range you should choose to start with. Above this level there is a high risk of liquidation.
When you choose to bet on a higher leverage without any risk management, you are getting yourself into trouble. However, if you really want to trade with more than 20x leverage, make sure to be prepared for all the consequences.
Experienced traders with 20x-40x margin trading often look at the charts closely because they cannot afford to lose their entire portfolio if something goes wrong.
Finally, always plan your trades in advance and never trade in a hurry. The more excited you are, the more stupid your decisions will become. So keep calm, use logic and don’t be greedy. This can help you make better decisions while you use leverage.
What is Bitmex Rekt?
The Bitmex platform quickly became known in the crypto world and it wasn’t long before traders coined the term “Bitmex Rekt”.
Bitmex Rekt is Any trader’s nightmare. That means your position has been liquidated and your money is lost. This happens a lot with traders, especially those who don’t use stop loss. This term became popular when OGs started using it and when BitmexRekt bot was born.
Basically the Bot shows all the biggest losses from Bitmex. What makes it special is that the biggest losses are displayed along with a funny message like:
Liquidated short on XBTUSD: Buy 1,096,034 @ 3625 🔥 ~ Triple kill ~ “Bitcoin was a mistake”
— REKT (@BitmexRekt) February 13, 2019
Ironically, the jokes and presentation of how much one person lost made Twitter love it. The twitter bot has over 324,000 tweets and over 40,000 followers. In fact, it became so popular that another bot appeared, especially Big Rekt (liquidating 2,000,000 contracts or more).
[16:48:14 UTC] Liquidating short on BitMEX XBTUSD – Buy 5,596,536 @ 3,548
— Big Rekts [Bitmex] (@BigRekts) February 8, 2019
As a trader, it is important to avoid getting Bitmex Rekt. That means your contract has been liquidated and you have lost all the money put into it. And you really don’t want this to happen. To prevent that, you should place a stop loss near your liquidation. You will lose part of your bet – but it is better than losing everything.
So remember, don’t trade without the right strategy and stop loss. There are many Bitmex calculators created to help you.
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