But I saw that it requires a huge amount before you can start an account in margin trading so how much the minimum of making an account?
Right now, I’m using BitMex as my exchange with margin trading. The $10000 on Bitfinex is history IIRC. I recently registered there but didn’t get to deposit any coins to trade. Not yet anyways. 
Topic: A Complete Guide to Margin Trading for Beginners - page 2. (Read 394 times)
It takes 10 minutes for me to read this very informative thread, I just wanted to know how margin trading it works and the possible risk on it. All I know is in basic trading the buy low and sell high method but about this, it is very interesting to learn.
But I saw that it requires a huge amount before you can start an account in margin trading so how much the minimum of making an account?
But I saw that it requires a huge amount before you can start an account in margin trading so how much the minimum of making an account?
I have been there and I regret becoming like that. I lost a lot of money just by trading leverage and I thought that I'm good, that I'm confident enough to see my balance grow but lost a lot. I think I'm continuing to grow into a better position.
Me too. I still sometimes have a problem restraining myself not to risk too much but to go slow and try to have consistent profit, instead of taking huge risks. I have to remind myself that I'm playing the long game. And the long game means winning by not losing.
No risk means no gains, everything has risks.
I have been there and I regret becoming like that. I lost a lot of money just by trading leverage and I thought that I'm good, that I'm confident enough to see my balance grow but lost a lot. I think I'm continuing to grow into a better position.
Me too. I still sometimes have a problem restraining myself not to risk too much but to go slow and try to have consistent profit, instead of taking huge risks. I have to remind myself that I'm playing the long game. And the long game means winning by not losing.
This is a great guide for someone who has never tried margin trading. You have emphasized the risks, which are huge comparing to normal trading, with the dreaded margin call being on the top of them. The main benefit is primarily the increased buying potential, as you pointed out.
Thank you for liking it, I think everyone should know that even if it's a simple guide like this.I would just add one point: you are already taking huge risks by even engaging in margin trading. Minimize the risk by always trading a portion of your entire portfolio.
I like your suggestion. It is indeed one of the needs when you think of trading, as I have included in some of my guides on my website, I did include a part of that. Especially considering the part where you should risk what you can afford to lose. I know some people are striving to get huge gains and get them fast. As a result, they trade their entire account with huge leverages. Better to be safe than sorry.
I have been there and I regret becoming like that. I lost a lot of money just by trading leverage and I thought that I'm good, that I'm confident enough to see my balance grow but lost a lot. I think I'm continuing to grow into a better position.
This is a great guide for someone who has never tried margin trading. You have emphasized the risks, which are huge comparing to normal trading, with the dreaded margin call being on the top of them. The main benefit is primarily the increased buying potential, as you pointed out.
I would just add one point: you are already taking huge risks by even engaging in margin trading. Minimize the risk by always trading a portion of your entire portfolio. I know some people are striving to get huge gains and get them fast. As a result, they trade their entire account with huge leverages. Better to be safe than sorry. Therefore, decide to trade a portion of your account with smaller leverages, so if you get liquidated, at least the majority of your funds are still there, and your get to have many additional tries/trades.
I would just add one point: you are already taking huge risks by even engaging in margin trading. Minimize the risk by always trading a portion of your entire portfolio. I know some people are striving to get huge gains and get them fast. As a result, they trade their entire account with huge leverages. Better to be safe than sorry. Therefore, decide to trade a portion of your account with smaller leverages, so if you get liquidated, at least the majority of your funds are still there, and your get to have many additional tries/trades.
Traders with limited resources tend to look for opportunities to earn more while trading cryptocurrencies. Margin trading allows precisely that - making more money with limited resources by adding leverage to the investment or position. This increases the amount invested without actually holding the assets. Before we go into details, it is essential to say that margin trading is carrying a very high risk, and it can lead to significant losses if not done correctly.
What is Margin Trading?
Put, margin trading is trading with the money borrowed from the broker. It can be seen as taking a loan from your broker.
Although trading on a margin doesn’t provide leverage in itself, it can be used to create leverage. This is because the amount you are allowed to trade on a margin directly depends on how much money you currently have in your account. Some exchanges allow up to x100 leverage, but typically it’s x2 to x6. For example, if your cash account holds 50,000 USD with x4 leverage, you would be able to use up to 200,000 USD for trading.
Requirements for a Margin Trading Account
Trading on margin is usually separated from crypto-cash trading on the exchanges. Some require a certain amount of cash to use the margin - for example, Bitfinex requires a deposit of 10,000 USD just to get registered. Thankfully, they changed that and let new people come into Bitfinex with even a small account balance.
Also, loaning money from your broker (exchange) is not free. The margin needs to be returned with interest, and different exchanges charge different interest rates. The interest rates for margin trading are usually lower than personal loan rates, making it more attractive to borrow through the broker than to take a personal loan.
Who Can Do Margin Trading?
Margin trading carries additional risks since you are trading the loaned money too. Additionally, managing the margin account to maintain a sufficient cash balance can tricky to master as market prices are always changing. For these reasons, margin trading is something to be considered primarily by experienced traders who are comfortable with managing risk and completely understand how margin trading works. If you aim to use margin, consider diversifying your portfolio to protect your assets against sudden changes in the market that can lead you to fall below your margin account minimum (below which the position gets liquidated).
Benefits of Margin Trading
1. Increase Buying Power and Profit Potential
Margin trading offers the ability to increase buying power and, subsequently, potential profits from trading. Margin trading allows you to buy more cryptocurrency than you would be able to buy with the cash on hand. The exact increase in purchasing power depends on your broker (from x2 to x100, or even higher). This increases your profits since each peak in coin’s value is multiplied by your margin value (from two to one hundred times).
2. Take Advantage of More Trade Opportunities
One of the great features offered by margin trading is taking advantage of multiple trading opportunities. Margin can, and often should, be used to buy various coins rather than invest in a single coin. For example, if you take 10,000 USD in the margin, you could buy 2,500 USD worth of four different coins to manage your risk better while at the same time increasing your opportunity to profit.
3. Short Selling
Another great benefit of margin accounts is the ability to short sell, which gives profits when a coin’s price falls. This means it is possible to make money even in the declining market, which is something experienced traders often take advantage of.
Risks of Margin Trading
1. Margin Calls
The dreaded margin call, which informs you that your account’s balance is below the minimum amount required to maintain your trade is a significant risk of trading on margin. When you receive a margin call, you have a limited window of time to either deposit more funds or sell some of your coins bought on margin. This means if you don’t have extra cash to add to your margin balance, you could be forced to sell at a loss instead of waiting out a low price period.
2. Interest Charges
Another downside of margin trading is the interest on your loan. Although margin interest rates are mostly lower than personal loan interest rates, the amounts can quickly add up if you perform various margin trades.
3. Additional Trading Risk
Trading with double (or higher) buying power also means that your potential loss is also doubled if a trade goes wrong. This is why the diversification of the portfolio is important. Many inexperienced traders are not prepared both financially and psychologically to handle a portfolio that comes with increased buying power. Margin trading also brings many psychological risks as the beginners, usually encouraged by initial success, bite off more than they can chew. This potentially can lead to huge losses, which inflict a lot of stress to the trader. It is essential to consider these risks before starting trade on a margin.
Conclusion
Margin trading is a great way to boost purchasing power, especially if you are an experienced trader. However, it comes with significant risks, particularly if misused. Make sure to understand the margin trading well and diversify portfolio before jumping into margin trading.
What is Margin Trading?
Put, margin trading is trading with the money borrowed from the broker. It can be seen as taking a loan from your broker.
Although trading on a margin doesn’t provide leverage in itself, it can be used to create leverage. This is because the amount you are allowed to trade on a margin directly depends on how much money you currently have in your account. Some exchanges allow up to x100 leverage, but typically it’s x2 to x6. For example, if your cash account holds 50,000 USD with x4 leverage, you would be able to use up to 200,000 USD for trading.
Requirements for a Margin Trading Account
Trading on margin is usually separated from crypto-cash trading on the exchanges. Some require a certain amount of cash to use the margin - for example, Bitfinex requires a deposit of 10,000 USD just to get registered. Thankfully, they changed that and let new people come into Bitfinex with even a small account balance.
Also, loaning money from your broker (exchange) is not free. The margin needs to be returned with interest, and different exchanges charge different interest rates. The interest rates for margin trading are usually lower than personal loan rates, making it more attractive to borrow through the broker than to take a personal loan.
Who Can Do Margin Trading?
Margin trading carries additional risks since you are trading the loaned money too. Additionally, managing the margin account to maintain a sufficient cash balance can tricky to master as market prices are always changing. For these reasons, margin trading is something to be considered primarily by experienced traders who are comfortable with managing risk and completely understand how margin trading works. If you aim to use margin, consider diversifying your portfolio to protect your assets against sudden changes in the market that can lead you to fall below your margin account minimum (below which the position gets liquidated).
Benefits of Margin Trading
1. Increase Buying Power and Profit Potential
Margin trading offers the ability to increase buying power and, subsequently, potential profits from trading. Margin trading allows you to buy more cryptocurrency than you would be able to buy with the cash on hand. The exact increase in purchasing power depends on your broker (from x2 to x100, or even higher). This increases your profits since each peak in coin’s value is multiplied by your margin value (from two to one hundred times).
2. Take Advantage of More Trade Opportunities
One of the great features offered by margin trading is taking advantage of multiple trading opportunities. Margin can, and often should, be used to buy various coins rather than invest in a single coin. For example, if you take 10,000 USD in the margin, you could buy 2,500 USD worth of four different coins to manage your risk better while at the same time increasing your opportunity to profit.
3. Short Selling
Another great benefit of margin accounts is the ability to short sell, which gives profits when a coin’s price falls. This means it is possible to make money even in the declining market, which is something experienced traders often take advantage of.
Risks of Margin Trading
1. Margin Calls
The dreaded margin call, which informs you that your account’s balance is below the minimum amount required to maintain your trade is a significant risk of trading on margin. When you receive a margin call, you have a limited window of time to either deposit more funds or sell some of your coins bought on margin. This means if you don’t have extra cash to add to your margin balance, you could be forced to sell at a loss instead of waiting out a low price period.
2. Interest Charges
Another downside of margin trading is the interest on your loan. Although margin interest rates are mostly lower than personal loan interest rates, the amounts can quickly add up if you perform various margin trades.
3. Additional Trading Risk
Trading with double (or higher) buying power also means that your potential loss is also doubled if a trade goes wrong. This is why the diversification of the portfolio is important. Many inexperienced traders are not prepared both financially and psychologically to handle a portfolio that comes with increased buying power. Margin trading also brings many psychological risks as the beginners, usually encouraged by initial success, bite off more than they can chew. This potentially can lead to huge losses, which inflict a lot of stress to the trader. It is essential to consider these risks before starting trade on a margin.
Conclusion
Margin trading is a great way to boost purchasing power, especially if you are an experienced trader. However, it comes with significant risks, particularly if misused. Make sure to understand the margin trading well and diversify portfolio before jumping into margin trading.
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