How BitMEX Margin Trading is Beneficial?
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BitMEX
(Bitcoin Mercantile Exchange) is one of the most popular and recognized crypto
trading platforms known for margin trading. As the name suggests, this platform
offers crypto trading through Bitcoins and suits perfectly for professional
traders. Here we will discuss how margin trading works in BitMEX and how to
remain profitable in this volatile crypto trading market while trading with
leverage?
It is
always worth remembering that trading with leverage or margin trading is
profitable for professional traders, and not for beginners. Despite offering
large potential gains, trading with leverage is quite risky and it’s important
for the traders to trade this kind of trading carefully. BitMEX is one of the
most advanced trading platforms for cryptocurrency trading considering its high
liquidity levels and great performance.
BitMEX
works with crypto derivatives considering it offers a tool which can be sold
and bought on margin trading. At this platform, users will be trading actual
Bitcoin and Altcoin contracts which derive their value from the price of their
respective crypto assets. This kind of trading is useful to users who don’t
have sufficient funds to perform large trades but they are certain about the
specific direction of the market.
So,
what the hack is margin trading?
Margin Trading
Margin
trading or trading with leverage is the practice of trading crypto assets using
borrowed funds from third parties. In general, this kind of trading is used by professional
or expert traders to perform large trades.
When
you perform margin trading, you can access the increased buying power and may
open the positions which are much larger than your current account balance
available for crypto trading. Let’s understand it with an example:
Say,
you have 10 BTCs available for trading in your account, and you want to place a
trade with margin 10:1, you can open a position worth 100 BTCs. This further
means that if the market moves in a favorable direction, you will access 10
times profit. However, on the other side, it also has the effect of magnifying
losses as there are chances that the market may move against you.
The
assets provided by the trader would work as collateral for the borrowed funds.
This is very important for the trader to know about collateral and other terms
at the time of margin trading.
How does BitMEX margin trading works?
BitMEX
is the popular crypto exchange that allows its traders to trade with the
leverage of up to 100:1, providing traders’ opportunity to increase their
potential gains. However, the amount of leverage that you can access also
depends on your initial margin, and the maintenance margin.
With
leverage trading, you have two options:
- Going long- It involves buying
a contract as you believe it will increase in value.
- Going short- It involves
selling a contract as you think that its price will move down, and then you can
buy it back at the reduced prices later.
Whenever
you open a position at BitMEX, a portion of your account balance will be held
as collateral for funds which you have borrowed from the exchange. While BitMEX
offers several cryptocurrencies to trade, all the profits and losses are
settled in Bitcoin only. Therefore, users have to deposit and withdraw funds in
Bitcoin only rather than dollars.
To
leverage trade on BitMEX, you need to follow the below steps:
- Register for a BitMEX account first.
- Deposit funds into your account.
- Navigate to the trading screen by choosing the Trade link present at the top of the screen.
- Enter the details of your position in the order box section.
- Use the slider below the order box to set the desired level of leverage.
- Review your transaction details by clicking on the Quantity field.
- Open your position by going long or short.
Benefits of BitMEX margin trading
Do you
know why pro traders prefer BitMEX
margin trading? Here are the reasons:
- User-friendly platform
- Low fees
- Easy to handle user interface
- Supports all the advanced and
professional order types
- Trading engine works smartly
without any glitches
Trading
on BitMEX is a bit different from other platforms as these platforms allow you
to directly trade the coins in your account meaning you directly buy or sell
BTC while you execute orders.
But on
BitMEX, you open a position wherever you think the price will go on, so as to
gain the price difference as your profits in case the trading goes successful.
You are buying contracts for long or short trades and every trade must be
closed at some point, i.e. your target.
This
platform employs two different methods of margin trading including:
- Cross margin
- Isolated margin
Cross Margin
It
allows you to use all the funds in your margin trading account to prevent
liquidations. In certain situations, you may lose more than your initial margin
for a particular position, but this kind of trading will also prevent you from
liquidation.
Isolated Margin
The
isolated margin can be used for opening short-term positions and take instant
returns. This method opens a position with a liability of only your initial
margin.
Yes,
this type of trading only puts your initial margin at risk. As in the case of
liquidations, it doesn’t use any of your account balances. So, It can prevent
extra losses but cannot prevent liquidations.
Important risk management tips for BitMEX leverage trading
As we
all know that trading with leverage is risky, here are the key points to
minimize the risks with such trading:
- Start with a smaller amount
- Limit your margin/leverage
- Pick up the market and
understand your order
- Use limit orders instead of
market orders
- If you are a beginner, avoid
leverage trading
Conclusion
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