Anyone who has seriously taken up cryptocurrency trading has faced such a tool as margin trading. The opportunity to increase potential earnings may be interesting to many people, that’s why it is important to learn more about it. This can be done using the example of a large European cryptocurrency exchange, WhiteBIT.
What is margin trading?
Margin trading is a type of trading that involves the use of funds borrowed from a crypto exchange to gain access to larger amounts of capital. This multiplies the amount of the transaction and the potential profit from it. You can choose preferable leverage or the ratio of the amount of the exchange loan to the amount of the trader’s personal assets. The amount of leverage depends on the conditions offered by the exchange. For example, WhiteBIT offers the following leverages: 1x, 2x, 3x, 5x, 10x, and 20x.
In general, margin trading has a fairly simple principle. For example, you have decided to purchase a certain digital asset, which, in your opinion, can grow in value and bring you profit from the subsequent sale. With 1000 USDT on your balance, you can use the x5 leverage and increase your buying potential to 5000 USDT.
Profit earned using margin funds goes to you, minus the trading fee and the fee for the use of borrowed funds from the exchange.
At the same time, it is important to understand that margin trading also carries the corresponding risks since the number of potential losses in the event of a fall in the asset value will also increase, and the loss will be written off from your funds.
Margin trading competitions
For those users who think they are good at margin trading, WhiteBIT offers trading competitions with various trading pairs listed on the exchange, for example, ADA USDT.
The rules are quite simple: users join the competition and start trading certain digital assets. The users with the largest trading volume receive the rewards. The prize fund is indicated on the competition page. The trading volume is calculated from the total amount of executed orders. Each tournament starts on the days specified in the terms and conditions.
The progress can be tracked on the leaderboard, which is updated every 30 minutes. Within 120 hours from the end of the tournament, the winners receive their prizes.
To ensure fair competition and prevent fraud, WhiteBIT has established a number of rules, failure to comply with them leads to disqualification. It is forbidden to execute your own orders, use accounts with zero fees, API bots, multi-accounts, etc.
Activities are held regularly with the most popular coins, and they are a great opportunity to profit from crypto.
Why should one choose margin trading?
As mentioned above, margin trading is not suitable for beginners. It is difficult to be successful in this type of trading without some experience and the ability to predict events in the market.
At the same time, margin trading can be a great way to increase the income of skilled traders who want to earn up to 20x from what they have. In fact, a trader, guided by his knowledge and experience, is simply buying and selling cryptocurrencies, but with one difference: the profit is much higher.
Margin trading can also be used for diversification. It opens up an opportunity for a trader to open several positions at once with a relatively small investment. In addition, margin trading is useful for traders because it does not require large amounts to be deposited into the account.
A trigger order implemented by WhiteBIT helps to protect users against excessive risks. This type of order buys or sells an asset when a certain value is reached. A trader does not need to constantly monitor the exchange rate because the position will be automatically closed when the price reaches the point you set.
When a position becomes unprofitable, a trader receives a Margin call – a signal to deposit more to the margin balance. Otherwise, the assets get liquidated to cover losses. At the same time, proper market analysis, an effective risk management strategy, and using tools such as a trigger order contribute to minimizing risks.
Margin trading is a great option for skillful traders who have the right trading strategy, attention to detail, and enough courage. It is necessary to be able to analyze the market, be aware of the risks, and know how to reduce them. All those factors increase the chances of earning more by using fewer funds.
