Crypto 101

The ultimate guide to cryptocurrency margin trading




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Margin trading Crypto Heroes

The higher are the risks, the higher are your profits. Since cryptocurrency trading is a very risky area, especially when compared to the traditional stock market, it can make you a millionaire with a Lamborghini or a beggar in the street in a blink of an eye.

Also, there is a method to increase risks and profits even further. This method is called margin trading. In this article, we are going to take a closer look at how margin trade works, review some platforms that support this option and give some useful tips on how one can make money with this tool during the market downtrend.

What is margin trading?

The term ‘margin trading’ itself isn’t new. It’s been around for ages at the traditional stock market long before Bitcoin was ever invented. Investopedia defines buying on margin as the purchase of an asset by using leverage and borrowing the balance from a bank or broker.

Simply put, a margin trader bets that the price of a given stock or a digital currency grows or falls X times by a certain date. To conduct this deal, he deposits some amount of crypto funds and borrows the rest from the platform.

If the bet proves to be correct, he gets X-fold profits minus the amount borrowed. If no, he simply loses the deposit. Let’s review the whole process using an example with real numbers.

How margin trading works in real numbers

Let’s say, you buy a 100 USD worth of Bitcoin Cash on a Bitcoin exchange via margin trade and make a bet that its price will double. To conduct the operation, you pay 20 USD of your own money and borrow 80 USD from the exchange.

If you get out of the trade immediately after you make the bet, nothing will change. You will get your 20 USD back and the platform will get 80 USD.

However, if in a while your bet proves to be correct and BCH price makes x2, you will close the trade with good profits. In this case, you will return the borrowed 80 USD and walk away with 120 USD.

Profit = 100 USD x 2 – 80 USD = 120 USD

So with 20 USD invested, you eventually get 120 USD, which makes up x6 profits. Without margin trading, you would only make x2.

The scheme works both for betting on currency growth and decline (that is, you can bet that the price of the selected digital currency falls and count your profits just the same if it does. However, if your bet is wrong and the price goes the opposite direction, you will only lose your deposit.

Margin trading Crypto Heroes

Pros and cons of margin trading

Such an approach has both its upsides and downsides, just like anything else in crypto and other areas.


  • Higher profits in case of the right bet: If you are a risky person, you may find this game of dice really thrilling.
  • Diversify your portfolio: You can add a much bigger number of cryptocurrencies to your portfolio by paying only a small amount.
  • Hedging: Adding futures to your portfolio is a great way of hedging it since you don’t have to sell your BTC and you can trade short during the ‘bear season’ when the market is at the downtrend.


  • Higher losses in case of the wrong bet: The chances to lose your deposit are just as high due to the manipulative nature of the cryptocurrency market.
  • Fees: Since free cheese can only be in a mousetrap, you have to pay additional fees to borrow the money.
  • Stress: If you can’t put your emotions aside while trading, you will feel constant stress that will be enhanced by imaginary profits or losses on every deal.

Exchanges with margin trading

If these cons don’t scare you off and you’ve decided to eventually take the risk, you may wonder where you can do this. Here’s the list of exchanges that support the margin trading option:

BitMEX: So far, this is the biggest exchange that specializes solely on the margin trading. Registration is pretty simple here as it requires from new users only to specify their email addresses and set up multi-factor authentication (not obligatory). Apart from Bitcoin futures, BitMEX has recently added some more altcoins for margin trading, such as Cardano, Bitcoin Cash, EOS and a few others.

Huobi: This is an international cryptocurrency exchange that offers margin trading among other professional traders’ tools. The list of supported currencies available for trading on margin is much bigger than on BitMEX. The downside is an obligatory KYC (Know-Your-Customer) procedure.

Kraken: Kraken is one of the biggest exchanges that support margin trading. Since it allows uploading funds from your bank account, this platform has very high requirements in terms of KYC. It may be a challenge to get onboarded there, but it’s worth it.

Poloniex: This US-based exchange allows conducting only crypto-to-crypto transactions. The registration is simple, although KYC is still needed for those who want to increase trading limits.

All these manipulations

You may have heard it before. The cryptocurrency market is all about manipulations.

This is true since big amounts of top cryptocurrencies such as Bitcoin, Ether, Litecoin, XRP and many others are concentrated in the hands of very few people, the so-called ‘whales’. And these whales do nothing else but play on the emotions of the crowd and thus increase their wealth. The margin trading markets make it particularly clear in the times of the downtrend.

Do you remember this drastic fall of the cryptocurrency market in November 2018? Just take a look at Bitcoin’s price graph:

Bitcoin price drops in November 2018 Crypto Heroes

Do you see what’s going on here?

Bitcoin price abruptly falls. Margin traders make short bets that its price is going to decrease even more. When the critical mass of such bets is reached, the whales pause the fall by purchasing huge amounts of crypto and hold the price at the same level for a few days until all these bets burn out. Then they sell everything off and the fall continues.

5 useful tips for margin traders

In order not to fall victim to these manipulations and not to lose all your health on useless stress while trading on margin, mind these rules.

  • Follow the major market news and events. Buy at rumors, sell at the news. This general rule for traders applies to the area of margin trading just as well. Be mindful of what’s going on in the industry in order to make the right choice when to enter and when to exit trading positions.
  • Start with small amounts. If you are new to margin trading, never bet on too big sums. Bet only as much as you can afford to lose because most likely, that’s what will happen.
  • Always use the stop loss option. This feature is a good assistant in risk management. However, be careful not to set it too close or too far from the price at which you purchased the asset. In the first case, your bet will most likely close soon after you open it. Otherwise, you risk losing too much.
  • Long is always better than short. Diversify your bets to the long-term run, don’t put everything into one position. Thus, you will have a chance to see what strategies really work.
  • Study the technical analysis. Learn to see the signs on the price graphs and make your own predictions on the price moving.


Margin trading is an awesome tool for fortune-seekers with a sufficient portion of luck and nerves. It can make you rich or lose everything in a few clicks of a mouse. And since the cryptocurrency market is highly manipulative, both options have equal chances to become true.

The most important thing here is to hold back your emotions. Never let your feelings take over your mind. Work out your own strategy and stay cool-headed no matter what’s going on out there. This is the only way that you can save your funds and even increase your earnings.

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