Margin Trading - page 2. | Bitcointalksearch.org

ribuck

donator

Activity: 826

Merit: 1060

Billed the difference and pursued outside the exchange. Certainly not forgiven.

Quote from: mtgox

If your margin balance drops too low all your positions are liquidated

This suggests to me that MtGox would liquidate before the margin is exhausted (i.e. when it drops to some percentage) which gives the exchange some leeway for a further drop in price before the liquidation can be carried out.

FreeMoney

legendary

Activity: 1246

Merit: 1016

Strength in numbers

Quote from: ribuck on November 03, 2010, 04:56:19 PM

Suppose you buy $100,000 worth of bitcoins on a margin of $1000. The moment the value of those bitcoins drops to $99,000, the exchange sells them. The proceeds of that sale, plus your $1000, gives the exchange its $100,000 back.

What if there is no bid there? Liquidated a little below and billed the difference or forgiven?

davout

legendary

Activity: 1372

Merit: 1008

1davout

Quote from: ribuck on November 03, 2010, 04:56:19 PM

Suppose you buy $100,000 worth of bitcoins on a margin of $1000. The moment the value of those bitcoins drops to $99,000, the exchange sells them. The proceeds of that sale, plus your $1000, gives the exchange its $100,000 back.

Ok I see, so it only makes sense if you re-sell them shortly after, amirite ?

ribuck

donator

Activity: 826

Merit: 1060

Suppose you buy $100,000 worth of bitcoins on a margin of $1000. The moment the value of those bitcoins drops to $99,000, the exchange sells them. The proceeds of that sale, plus your $1000, gives the exchange its $100,000 back.

mtgox

full member

Activity: 185

Merit: 102

They never get a negative balance. Their account would be margin called (positions liquidated) before that.

davout

legendary

Activity: 1372

Merit: 1008

1davout

I don't get how you'll be able to hold people accountable for negative balances

kiba

legendary

Activity: 980

Merit: 1020

So is this your new business model?

mtgox

full member

Activity: 185

Merit: 102

It isn't exactly a loan. It works basically like this:
http://www.babypips.com/school/lots-leverage-and-profit-and-loss.html

Quote

Typically the broker will require a trade deposit, also known as "account margin" or "initial margin." Once you have deposited your money you will then be able to trade.

For example, if the allowed leverage is 100:1 (or 1% of position required), and you wanted to trade a position worth $100,000, but you only have $5,000 in your account. No problem as your broker would set aside $1,000 as down payment, or the "margin," and let you "borrow" the rest. Of course, any losses or gains will be deducted or added to the remaining cash balance in your account.

If your margin balance drops too low all your positions are liquidated. It basically allows you to increase your return or your loss from trading.
It would be pretty risky with how volatile the current market is but some people might be into it.

jimbobway

legendary

Activity: 1304

Merit: 1015

No, not yet. Margin trading makes it very volatile. Maybe when the bitcoin is more stable.

FreeMoney

legendary

Activity: 1246

Merit: 1016

Strength in numbers

Quote from: TTBit on November 03, 2010, 03:16:40 PM

how exactly would the margin be secured?

If I have $1000 cash in account and lose $1500, how will the other side be compensated? Or if I have 1000 btc and lose 2000 btc, where will the other 1000 btc come from?

I wonder also. My thinking is that "margin trading" means taking a loan from the house. Is this not the case? Maybe options make more sense for levered trading?

I guess some brokers will automatically liquidate your positions when you run out, but that's only going to work if there is lots of liquidity even after a large price move.

TTBit

legendary

Activity: 1137

Merit: 1001

how exactly would the margin be secured?

If I have $1000 cash in account and lose $1500, how will the other side be compensated? Or if I have 1000 btc and lose 2000 btc, where will the other 1000 btc come from?

ribuck

donator

Activity: 826

Merit: 1060

Margin trading is not for me, but it would have been very interesting over the past 12 hours with MtGox trades swinging repeatedly up and down, and touching $0.125 and $0.275.

OneFixt

member

Activity: 84

Merit: 11

I'd be very interested.

mtgox

full member

Activity: 185

Merit: 102

Would anyone be interested in Trading BTC/USD on margin? Like how trading is done on most forex sites?

Topic: Margin Trading - page 2. (Read 4641 times)