Understanding BitMex Margin Trading On TrailingCrypto |
Posted: May 7, 2020 |
BitMex is one of the exchanges supported by TrailingCrypto exchanges and it offers BitMex margin trading. The exchange offers traders an opportunity to use leverage in bear markets to earn some cash. The platform offers 100X leverage on short trades and thus it has a massive opportunity of almost doubling your investment within a short time. What is margin trading? Margin trading involves carrying your trade using borrowed funds that you speculate that will magnify your returns in cryptocurrency selling and buying. When using leverage you access enhanced purchasing power and as a result, you can easily open large positions compared to your actual balance. For instance, in BitMex margin trading you will have 100X leverage meaning that you can leverage your position such that if the market tips to your favor you will get 100 times in profits. Interestingly it can amplify losses too when the market is against you. How Bitmex margin trading works BitMex allows traders to create anonymous accounts but to begin trading you will have to deposit Bitcoin (BTC) to the account. Other cryptocurrencies such as Ripple, Litecoin, and Ethereeum or any other altcoin are not accepted. You can take advantage of 100X leverage on your contracts but the leverage amount will depend on your initial margin that is the money you deposit when opening a position as well as maintenance margin. The cryptocurrency exchange doesn’t trade in Bitcoin but rather it deals with contracts which are agreements to sell or buy cryptocurrency without owning them. When you withdraw your money you receive the contract funds in Bitcoin in your account. To leverage cryptocurrency trading on Bitmex you can either go short or long. When going long it means that you expect the contract you have purchased to increase in value. On the other hand, when shorting it means you expect the price of the contract you are holding to go down and thus you sell it so that you can later buy it at a lower price. To open a position it means Bitmex will hold part of your balance as collateral for the amount you borrow. If the market moves in your favor you will close your position and earn profits and the collateral is refunded with the profit minus any charges. Similarly if market tips against your prediction you will lose and the trade closes automatically and the collateral is liquidatedonce the market reaches the liquidation price. Types of contracts on Bimex for margin trading There are two contract types that the exchange offers for BitMex margin trading. Perpetual contracts: These contracts are also known as perpetual swaps and they are the first contracts one will trade when they start. The contracts don't have an expiry date and thus are ideal for short term day trading. The rate of interest is variable and you can add or subtract cash flow from your equity. Futures Contracts: These kind of contracts have an agreed-upon date to sell or buy the contract at a specific price. They have a fixed interest rate making them ideal for long-term trading or near-term investing. Bottom line BitMex margin trading can offer massive returns to investors because of the high 100X leverage but it is important to note that this kind of trading is risky and requires experience.
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