Margin trading is an issue that has recently gained considerable popularity in the world. Events such as the r / wallstreetbets scandal and the growing popularity of Bitcoin have effectively attracted investors’ attention to this form of investment. BTC margin trading is still a kind of novelty. Today, however, we will take a closer look at it and check if and how much you can earn on it.
BTC Margin Trading
What is margin trading? We answered this question indirectly in previous entries. The essential elements of margin trading are leverage trading and margin trading. Together, these two elements form the basis of margin trading.
As a reminder, BTC Margin Trading allows investors to borrow funds from a broker for investment while paying a margin. The level of leverage determines the percentage of a trader’s total contribution. For example, a leverage ratio of 1: 100 specifies the margin of 1% of the total value of the order.
Although margin trading comes from traditional financial markets, cryptocurrencies have become a fascinating niche for this form of investment. There are already specialized platforms on the global market that support this form of investing. A great example is the Polish Geco.one project. Poles have been developing their platform for some time, offering a leverage of 1: 100 on the most popular cryptocurrencies.
Margin trading is primarily a short-term investment strategy. Therefore, an important aspect is the lack of price slippage resulting from the exchange rate differences of the traditional order book. When trading with leverage, it is worth paying attention to whether the given exchange reduces such risk. With platforms like Binance, leverage trading relies on a traditional exchange. Geco.one, on the other hand, focuses only on margin trading — there will be no price slippage, an external provider provides liquidity.
Earning on Margin Trading
The story is full of tales of huge gains from margin trading. Let’s look at the profit scale based on the example below:
We buy 10 BTC for 10,000 USD apiece.
The total investment is 100,000 USD.
For trading, we will use trade with a leverage of 1: 100, which will result in the required margin being only 1000 USD.
Suppose BTC increased its price by 10% — it is now worth 11,000 USD.
Let’s sum up our bill!
The total value of our investment is now 110,000 USD — this means that thanks to our deposit of 1000 USD, we were able to get a return of 10,000 USD (no commission). The return on investment is therefore as much as 1000%!
However, it should be remembered that there are also losses on the platforms and great financial successes. Therefore, it is a good idea to think carefully about your investment strategy. When asked if Margin Trading is profitable, Kamal, a Quora user, replied.
“Hi, margin trading is a double-edged sword. If you are right in your investment decisions… margin will give you more than what you could get with the same money without using margin trading. But things may be reversed as well if you misjudged the stock. So, should one keep away from margin trading… certainly not? Nevertheless jumping on the margin trading bandwagon is not desirable either. One has to be judicious with it and work out all pros and cons. Within limits it’s gainful but knowing that limit is not so simple as it appears. It is worth mentioning that all the great investors have used margin trading successfully. You too can try only after ensuring that you use it within defined risk zones. Happy margin trading…”