What is Margin Trading?
Essentially, trading on margin is trading on account using ‘leverage’ from a brokerage company or a crypto exchange. These funds are used to amplify your position and make bigger gains. However, it should be noted that losses can also be amplified by the same measure.
In order to start margin trading, you have to have a certain sum of money on your own account, as collateral. The leverage amount, i.e. the amount of ‘amplification’ you can get depends on the specific exchange. In Forex, it’s not unknown to have a leverage of up to 1:20 – which means, if trading with 100 EUR you’ll command a position size of 100 x 500, so 50,000 EUR.
In crypto, margin trading is a pretty new thing, and as ever, in bringing it to you CoinMetro is right on the cutting edge of the industry.
At launch, we’re offering 1:3, which means that if you want to make a trade with your 100 EUR deposit using margin trading, you can command a position size of up to 300 EUR. The rest will be posted by the exchange which charges a fee for it – in our case, we’ll charge a 30% annual fee, which is calculated every second – which means only pay for the amount of time you take the posted margin.
Advantages Of Margin Trading
- Margin trading allows traders to use bigger sums for trading. If for some reason a trader doesn’t have necessary sum on his account and he thinks it’s the perfect time to trade here and now, they can use margin trading to amplify their position size.
- With margin trading, it’s possible to boost profits by making more money in a shorter period of time. However, margin trading is a complex thing and only traders with sufficient experience and knowledge should use it. Beginners may easily slip into losses.
What To Remember When Trading With Margin
- The biggest risk of margin trading is to lose the capital as a result of a bad trading strategy. It’s important to keep in mind that the bigger is the leverage, the higher the profit can be, but also the higher the potential loss.
- It’s essential to consider the high volatility of the crypto market, which acts as an additional risk layer. If you’re taking your first steps into margin trading, examine the current market situation and trade accordingly.
- Novices are encouraged to start trading on margin with a leverage of no more than 2:1; and it’s recommended not to use all funds in a single trade.
We’ve Got You Covered
As a responsible exchange, we want to encourage and support you. If your account goes into the negative, we won’t chase you for that money, we take this on ourselves. So, in short – with CoinMetro you will never lose more money than you deposit. We’re nice like that.
Margin trading is a great facility that can work wonders if used reasonably. Take a closer look on the CoinMetro platform, try to feel where the market is going, and give it a shot if you feel confident.
See you soon,
The CoinMetro Team