What is Margin? How should new traders trade Crypto successfully? Mastering the rules of this tool will help you optimize your profits. Let’s find out with Crypto Trading below to find the right way to apply it to your trading strategy, increasing investment efficiency in the market.
Learn about Margin Trading in the Cryptocurrency Market
When trading cryptocurrencies, every trader wants to get the best profit. To get high profits, in addition to ensuring accurate price assessment, using the Margin tool is the best choice.
What is Margin Trading in Crypto?
Margin Trading is also known as leveraged trading. This is a trading method in which investors must borrow more money from the exchange to have capital for trading. It will create leverage for investors to make transactions.
However, in the Crypto market, not only the exchange lends you money (like in the Forex market). You can also borrow from other traders as well as lend your money to others and receive interest. Depending on the case, traders can borrow 3, 5, even 10, or 100 times the amount of money they have.
Thanks to the capital borrowed through Margin, you can trade with a larger position. For example, instead of only having 5 BTC, after lending, you have 100 BTC. Trading over 100 BTC will give you a higher profit than your capital of 5 BTC.
What are the types of margin structures in Crypto Trading?
Margin usage also comes in many different forms. It structures come in many varieties:
What is Cross Margin?
Cross Margin is a form of cross margin, which is borrowing based on the total number of accounts you have. That is, all of your capital, interest, and ratios will be calculated based on the total transactions of all cryptocurrencies that the trader has. When the ratio reaches the threshold that needs to be processed, the exchange will automatically select valuable coins to gradually “deduct debt”.
This method is beneficial because it allows you to transfer from one position to another. It gives traders more flexibility in trading and customizes their plans effectively. Therefore, it will avoid the risk of losing money when the market is volatile.
On the contrary, Cross Margin also has the disadvantage that if you lose, all coins will be recovered. Trading orders will also be closed, all positions will be affected.
See more: How to “get rich” thanks to crypto trading for trader
Isolated Margin Trading
Isolated Margin Trading is an independent form of deposit. It will be regulated by the exchange within a certain limit. If the transaction is a loss, the trader will only lose the amount of money placed in that position. The remaining assets remain unaffected. Compared to cross, this form is safer, so it is chosen by more new traders.
What is the Initial Margin requirement?
It is also an important term that traders need to know when trading leverage. So what is the Initial Margin? This is a form of initial deposit, also known as IM. That is, to trade deposit structures, traders must first make an initial margin with the corresponding money ratio.
In other words, this is the initial advance amount according to the exchange’s regulations. To trade Margin, traders must advance a specific amount of coins. This limit will determine the deposit level you can use.
Typically, the Initial Margin will be 5 – 10% of the amount you will be using. For example, you want to trade futures with cryptocurrencies, leverage 1:20. You want to trade 400 USD and the Initial Margin is 5%, the trader needs 20 USD to make this trade.
How does Margin work?
How Margin Trading works is a question that many traders are interested in. In the Crypto market, the way Margin works is not much different from the forex market:
- Traders proceed to open a trading position with the volume they want. For example, you want to open a coin transaction with 200 USD. Leverage level 1:10. That means traders can only need 20 USD to open an order with Margin. However, you will need to guarantee to the exchange that you have enough 2,000 USD in capital (Ordering 200 USD with leverage 1:10 helps you x10 profit but also x10 loss).
- You need this deposit to execute the transaction with the corresponding leverage. When opening a position, if you win, you receive the corresponding profit, returning the loan capital to the exchange. The remaining profit will belong to you. On the contrary, if you lose, the initial deposit is not enough to hold the order, the exchange will issue a notice (Margin call) for you to deposit more. In this case, it will be called maintenance deposit and the system will automatically determine the times when you have to deposit maintenance money.
Distinguish the difference between traditional trading and Margin Trading
Compared to traditional Crypto trading, Margin trading has many differences.
Firstly, traditional trading requires traders to have enough capital according to their trading needs. That is, if you want to trade with a position of 100 USD, you also need enough capital to do so. With margin trading, you only need 5 – 10% of the required capital to start trading.
Second, profit. The profit will be calculated on the position level that you have traded with leverage. That is, the profit level will be activated many times and of course, what you reap will be more than traditional trading.
Third, losses. A trade can generate profits up to 1000 times higher than a standard trade. But it also causes you to lose 1000 times higher than a standard trade. The risk of losing money for traders is much higher than with traditional trading. That is why all experts advise traders to do careful research and be very careful when choosing the leverage level.
Which investors are suitable for margin?
Not all Crypto investors are interested in leverage and Margin Trading. In fact, without caution, this trading method will eat up the trader’s capital as quickly as possible. Therefore, those who want to trade Margin must be experienced investors who understand the market.
Professional traders will know how to use Margins as a foundation for their transactions to be more effective. On the contrary, investors with little experience should consider carefully when using it.
Investors with a high-risk appetite will also be very suitable for this method. They love risky investments, feel excited when achieving large profit results, and are willing to accept losses if the worst scenario happens.
In fact, every investor can use Margin with the choice of leverage level that suits their needs. You should also learn about the details of taxes and fees when using this tool to optimize profits.
What are the benefits and risks of trading with the Margin method?
Understanding what Margin is, we can see very clearly the benefits and risks of using this method in Crypto Trading:
Benefits of Using Margin Trading
- It will bring the greatest economic benefits to traders. Compared with standard trading, it can bring attractive and high-value profits.
- It is available for all portfolios.
- With a small capital, traders can also trade large positions. Thanks to financial support through Margin, traders’ capital also increases rapidly and you will have the opportunity to expand your positions more in the future.
- It will also be effective in case of a market downturn if you choose Crypto derivatives products.
Risks of trading with the Margin method
- Traders are at risk of losing their accounts if the price does not match their prediction. The loss will also be many times higher than trading according to the standard of no Margin.
- Without expertise and a thorough understanding and analysis of it, it will be very difficult to implement effective trading plans.
The risk of the cryptocurrency market is very high because of its strong volatility. Crypto’s fluctuation amplitude is very large and market scenarios always follow unpredictable rules. Therefore, using Margin Trading is a way to optimize trading, but at the same time, it is also a big risk. Therefore, to trade safely, traders need to have a truly effective risk management strategy.
Steps to Start Trading with Margin Trading
To start trading with Margin Trading, traders will set up a position similar to the normal trading method. However, instead of trading standard clams, you will choose a Margin to deposit with a low capital. To understand better, let’s learn about how to trade Margin at MEXC as follows:
Step 1: Select the Crypto pair you want to trade.
Step 2: Choose type: Cross margin or independent margin? For convenience in trading, many traders often choose cross-margin.
Step 3: Transfer your spot account to a Margin account to start trading.
Step 4: Set up trading parameters: Buy/sell position, leverage level, order holding time, stop loss, and take profit points corresponding to the transaction.
How to Manage Risk Effectively with a Crypto Trading Margin Account?
The most important thing about this Margin method is to use the appropriate leverage to limit losses:
- If trading on timeframes from H1 – H4, priority should be given to using leverage and Margin x2 – x5.
- If trading M15, and M30 timeframes, you should trade with x5 – x10. The risk is also higher so exit early if you have profit.
- If trading M1, and M5 timeframes, that is, Scalping, traders can choose Margin x25 or more. However, the possibility of burning the account and getting Stop Loss is also very high, so be careful.
In addition, traders can also make some mistakes when choosing leverage. Either choose based on emotions, trade with the crowd, or even not use Stoploss.
Here are some effective trading experiences with Margin:
- You should restrain your greed and only use Margin at a safe level of x3, x4, x5.
- When there are signs of loss, holding on to losses is the reason why traders suffer heavier losses. At this time, you should exit the loss and reconsider your trading strategy.
- It is advisable to study how previous investors have used Margin to gain more experience in predicting the market.
- When starting out, traders should try playing with a small level of 2-3 times the capital to get used to it and see if this method is suitable for them.
Revealing effective trading tips with Margin
Trading effectively with Margin is not beyond the trader’s mastery of the Crypto Trading market knowledge. Only when you master the price trend and predict the trend correctly can you trade successfully without fear of any obstacles.
Knowledge and skills in market analysis are extremely important for Margin trading. It is the premise for traders to predict the price of any coin or token. It helps traders be more confident in implementing trading strategies.
At the same time, when you have enough knowledge, you will not be afraid of losing because your mentality is prepared. At this time, traders will have experience and effective risk management strategies when using it. Over time, you will build the most effective and optimal trading strategy.
Therefore, choosing to join a course in Crypto Trading is the solution used by many traders. Joining this course, traders will be trained thoroughly from basic to advanced knowledge about the market and experience in trading. From this basic knowledge, traders will apply it in analysis to come up with the most suitable trading strategy for themselves.
See more: Instructions for opening an OKX exchange account
What courses does Crypto Trading offer to users?
At Crypto Trading, you can get trained in a lot of content about the Crypto market:
- Course on CEX, DEX, and DeFi exchanges. Differences, how to identify, and how to choose a good exchange that suits your trading needs.
- Course on Blockchain and how Blockchain works, from there also understand the operating rules of Crypto.
- Crypto Trading Course with Lots of Content
- How to choose coin – token
- How to do technical analysis and use indicators, tools, Reversal candlestick pattern, etc.
- How to trade, choose the right Margin
- How to choose the right Crypto product for your short-term and long-term strategy.
- Basic coin trading products on the market and how to approach and invest.
- Learn how to apply news to Margin Crypto trading.
The most interesting thing is that you will learn from the experts on the exchange. The training content is rich, sharing practical trading experiences, and easy-to-understand visual instructions. The course is not only useful for new investors but also helps experienced traders gain more knowledge and more stable trading skills.
Benefits of taking a course in Crypto Trading
- Understanding Crypto Trading, mastering market knowledge, benefits, and risks of the market.
- Understand how to trade Crypto via Margin, Spot, P2P, NFT…
- Understanding and applying derivatives – Crypto trading products are considered the trend of the future.
- Know how to trade Crypto on exchanges, understand the meaning of parameters, and set up orders correctly.
- Ability to analyze the Crypto market technically. Traders will master the analysis tools, and choose the right tool for themselves. At the same time, can control trading psychology for more stable and accurate trading.
- Risk can be managed during the transaction process.
How to join Crypto Trading courses
To join the ourse at Crypto Trading as well as many other courses, traders just need to contact us directly. Or leave a comment below this article so that the support staff can contact you directly. Guaranteed that after a while, not only Margin trading but also many other trading methods and tools will be operated smoothly and effectively by you.
Conclude
Above is the complete guide to Margin trading in the Crypto market. Trading with it and leverage is a trend for traders with little capital and who love adventure. There are many opportunities, but also risks, so you need to pay attention. Sign up for an investment course at Crypto Trading now to master your trading and conquer the market with us!
FAQs
Are there any transaction fees for margin and leverage trading?
Yes, and the transaction fee will depend on the leverage and exchange regulations.
Is margin leverage, two names for the same concept?
No. Margin Trading will give you leverage, but it is not leverage.
Is there a fee to learn Crypto Trading?
Depending on the content of each course, it is free or paid. However, the fee is very reasonable and it is the basis to ensure the quality of the content delivered.
