What Is Margin Trading and Why Should You Trade Bitcoin With Leverage? 1

What Is Margin Trading and Why Should You Trade Bitcoin With Leverage?

Trading
• Digitex
April 13, 2021

Margin trading has become increasingly popular in the digital asset industry.

When you trade Bitcoin with leverage, you can maximize your profit potential while taking more risks with your positions.

Furthermore, it allows users day trading crypto to earn considerable revenue even on smaller price movements.

In this article, we will take a look at margin trading along with its benefits and potential risks involved for those who trade Bitcoin with leverage.

What Is Margin Trading?

Margin refers to the funds borrowed from a crypto exchange or a brokerage firm to long or short a specific asset on the trading platform.

For that reason, margin trading is the practice in which you trade an instrument using money borrowed from third parties (e.g., a broker, exchange, or other traders).

As a result, you have access to greater capital, which you can use to increase your potential profits as well as to amplify the effects of successful trades.

However, borrowing funds to trade Bitcoin with leverage has very different terms than, for example, getting a personal loan at your bank.

While you don’t have to deposit additional funds into your account – as the exchange uses the assets you have in your margin trading account as collateral – the service provider will liquidate your assets without prior consent if you suffer too much losses.

In such a case, when your margin account’s value falls below the exchange’s required amount, a margin call will occur. As a result, you will lose all of your collateral.

And the more leverage you use to trade Bitcoin, the stricter the exchange’s requirements will be for margin traders.

In most cases, you can trade digital assets on a margin with leverage between 2x and 100x. If you hold 0.1 BTC in your exchange account, a 100x margin would mean that you can borrow funds to trade up to 10 BTC.

What Are the Benefits of Trading Bitcoin With Leverage?

Below, we have collected the advantages of margin trading crypto:

  • More profits: When you trade Bitcoin with leverage, you are using more funds than what you have in your account. For that reason, successful trades on a margin will bring you more profits than ones without leverage.
  • Short trades: Without borrowing funds, you can only enter long positions for digital assets. On the other hand, margin trading allows traders to profit from bearish price movements by shorting crypto.
  • Profits on smaller price moves: Traders with short-term trading strategies like scalping aim to generate profits on small price movements very quickly, which they can achieve with margin trading. Moreover, trading Bitcoin with leverage also allows traders to generate income even in times of low volatility.
  • Diversification: With margin trading, traders have access to increased capital, which they can use to diversify their funds into more assets to maximize their gains and limit their risks.

Are There Any Risks of Margin Trading Crypto?

While trading Bitcoin with leverage certainly has its benefits, it also comes with risks for traders.

The first is the most obvious one: the more profits you (potentially) earn, the increased risks you face when trading assets on any market.

For that reason, if the asset’s price you trade takes a significant hit, it could trigger a margin call in which the exchange liquidates all your collateral.

As mentioned before, the risks of margin calls are greater when you are using more leverage for your trades.

As part of your crypto trading strategies, we recommend placing stop-loss orders to minimize the chances of margin calls, limit your losses, and protect your positions when trading Bitcoin with leverage.

Trade Bitcoin With Leverage at Digitex

Margin trading is an excellent practice for traders to diversify their assets, maximize their profits for winning trades, as well as to short cryptocurrencies.

However, margin trading involves more risks than the spot market. Therefore, it requires traders to leverage more disciplined crypto trading strategies that involve handy tactics, such as placing stop-loss orders.

Another great way to reduce the risks of margin trading is to trade crypto for free. By paying less fees, you maximize the chances for winning trades while keeping 100% of the profits.

The good news is that you can do exactly that on the next-generation zero-fee Bitcoin derivatives exchange Digitex.

Sounds great, huh?

Trade Bitcoin with leverage at Digitex now to enjoy a zero-fee margin trading experience!

 

April 13, 2021
Trading

What Is Margin Trading and Why Should You Trade Bitcoin With Leverage?

Digitex
What Is Margin Trading and Why Should You Trade Bitcoin With Leverage? 2

Margin trading has become increasingly popular in the digital asset industry.

When you trade Bitcoin with leverage, you can maximize your profit potential while taking more risks with your positions.

Furthermore, it allows users day trading crypto to earn considerable revenue even on smaller price movements.

In this article, we will take a look at margin trading along with its benefits and potential risks involved for those who trade Bitcoin with leverage.

What Is Margin Trading?

Margin refers to the funds borrowed from a crypto exchange or a brokerage firm to long or short a specific asset on the trading platform.

For that reason, margin trading is the practice in which you trade an instrument using money borrowed from third parties (e.g., a broker, exchange, or other traders).

As a result, you have access to greater capital, which you can use to increase your potential profits as well as to amplify the effects of successful trades.

However, borrowing funds to trade Bitcoin with leverage has very different terms than, for example, getting a personal loan at your bank.

While you don’t have to deposit additional funds into your account – as the exchange uses the assets you have in your margin trading account as collateral – the service provider will liquidate your assets without prior consent if you suffer too much losses.

In such a case, when your margin account’s value falls below the exchange’s required amount, a margin call will occur. As a result, you will lose all of your collateral.

And the more leverage you use to trade Bitcoin, the stricter the exchange’s requirements will be for margin traders.

In most cases, you can trade digital assets on a margin with leverage between 2x and 100x. If you hold 0.1 BTC in your exchange account, a 100x margin would mean that you can borrow funds to trade up to 10 BTC.

What Are the Benefits of Trading Bitcoin With Leverage?

Below, we have collected the advantages of margin trading crypto:

  • More profits: When you trade Bitcoin with leverage, you are using more funds than what you have in your account. For that reason, successful trades on a margin will bring you more profits than ones without leverage.
  • Short trades: Without borrowing funds, you can only enter long positions for digital assets. On the other hand, margin trading allows traders to profit from bearish price movements by shorting crypto.
  • Profits on smaller price moves: Traders with short-term trading strategies like scalping aim to generate profits on small price movements very quickly, which they can achieve with margin trading. Moreover, trading Bitcoin with leverage also allows traders to generate income even in times of low volatility.
  • Diversification: With margin trading, traders have access to increased capital, which they can use to diversify their funds into more assets to maximize their gains and limit their risks.

Are There Any Risks of Margin Trading Crypto?

While trading Bitcoin with leverage certainly has its benefits, it also comes with risks for traders.

The first is the most obvious one: the more profits you (potentially) earn, the increased risks you face when trading assets on any market.

For that reason, if the asset’s price you trade takes a significant hit, it could trigger a margin call in which the exchange liquidates all your collateral.

As mentioned before, the risks of margin calls are greater when you are using more leverage for your trades.

As part of your crypto trading strategies, we recommend placing stop-loss orders to minimize the chances of margin calls, limit your losses, and protect your positions when trading Bitcoin with leverage.

Trade Bitcoin With Leverage at Digitex

Margin trading is an excellent practice for traders to diversify their assets, maximize their profits for winning trades, as well as to short cryptocurrencies.

However, margin trading involves more risks than the spot market. Therefore, it requires traders to leverage more disciplined crypto trading strategies that involve handy tactics, such as placing stop-loss orders.

Another great way to reduce the risks of margin trading is to trade crypto for free. By paying less fees, you maximize the chances for winning trades while keeping 100% of the profits.

The good news is that you can do exactly that on the next-generation zero-fee Bitcoin derivatives exchange Digitex.

Sounds great, huh?

Trade Bitcoin with leverage at Digitex now to enjoy a zero-fee margin trading experience!

 

Latest News

Support

Complete Beginners Guide Now Live on Support Pages

Digitex Futures
• Sulla Felix
June 19, 2020

What an amazing journey Digitex Futures has had since January 2018 and most importantly, what a vibrant community has been built as a result. With its first 570 users onboarded and daily Volume averaging above $100,000,000, the Digitex Futures Exchange is starting to deliver its promises in the form of products. 

In the recent development update, we presented some awesome news on the roadmap, including working hard to get markets in new contracts such as ETH, gold, and oil live this summer. Digitex doesn’t just want to offer the most innovative cutting-edge exchange but also the most user-friendly platform on the market, proving that its users and community are priority number one. 

Many community members have followed Digitex through thick and thin, for which the team at Digitex can only extend the warmest gratitude and continue working tirelessly to deliver for those who have supported this project throughout this amazing journey. 

Preparing for Adoption

With such a strong community behind us, there is little doubt that adoption will follow shortly after public opening. Many of those joining will be first-time users gaining exposure to the exchange, with little previous knowledge of what we are offering and trying to achieve. 

To prepare for this, we have been developing a ‘Beginners Guide to Digitex Futures’ that we hope will help ease the learning curve. Not only for those who have no exposure to Digitex but also for those who have recognized the value of holding DGTX, and now need some guidance to start their trading journey.  

In this Guide, we have tried to cover everything that a new user needs to set up an account with Digitex Futures regardless of previous trading experience. We hope to help our users navigate the Exchange with ease and provide answers and understanding to some of the more difficult questions:

What is a Perpetual Futures Contract?

How does Leverage work and how is it linked to Margin and Liquidation?

Where do I get the DGTX token and how do I place trades on the Exchange?

We hope this guide can serve as the starting point for anyone and everyone with any questions about the Digitex Futures Exchange, what it is, and, how to use it. 

The Digitex Futures Guide aims to ensure that users have all the information required to provide complete clarity in how the platform is designed. Understanding the Exchange and its tools is the vital first step that users should take to give themselves the highest chance of success from their very first trade.  

The Guide is now live on our Support section, available to all.

Share It Far and Wide! 

This guide might not be required by everyone. But we all know someone who might benefit from this as an initial starting point.  Now, I would like to raise a call to arms – to those amazing supporters, please share the Guide with your friends and family who are interested in learning what Digitex is and has to offer. If you see others struggling, hopefully this Guide can serve as a starting point to help them along their way.

This journey has highlighted that the Digitex community is like no other when it comes to supporting one another. One year ago, how many of us would dare to believe that the first 570 traders would generate a daily volume of over $100,000,000. Now consider what we might achieve with another year of the same camaraderie. Let us continue to celebrate together, support each other, and strive for future success.

June 19, 2020
Digitex Futures

Complete Beginners Guide Now Live on Support Pages

Sulla Felix
Support

What an amazing journey Digitex Futures has had since January 2018 and most importantly, what a vibrant community has been built as a result. With its first 570 users onboarded and daily Volume averaging above $100,000,000, the Digitex Futures Exchange is starting to deliver its promises in the form of products. 

In the recent development update, we presented some awesome news on the roadmap, including working hard to get markets in new contracts such as ETH, gold, and oil live this summer. Digitex doesn’t just want to offer the most innovative cutting-edge exchange but also the most user-friendly platform on the market, proving that its users and community are priority number one. 

Many community members have followed Digitex through thick and thin, for which the team at Digitex can only extend the warmest gratitude and continue working tirelessly to deliver for those who have supported this project throughout this amazing journey. 

Preparing for Adoption

With such a strong community behind us, there is little doubt that adoption will follow shortly after public opening. Many of those joining will be first-time users gaining exposure to the exchange, with little previous knowledge of what we are offering and trying to achieve. 

To prepare for this, we have been developing a ‘Beginners Guide to Digitex Futures’ that we hope will help ease the learning curve. Not only for those who have no exposure to Digitex but also for those who have recognized the value of holding DGTX, and now need some guidance to start their trading journey.  

In this Guide, we have tried to cover everything that a new user needs to set up an account with Digitex Futures regardless of previous trading experience. We hope to help our users navigate the Exchange with ease and provide answers and understanding to some of the more difficult questions:

What is a Perpetual Futures Contract?

How does Leverage work and how is it linked to Margin and Liquidation?

Where do I get the DGTX token and how do I place trades on the Exchange?

We hope this guide can serve as the starting point for anyone and everyone with any questions about the Digitex Futures Exchange, what it is, and, how to use it. 

The Digitex Futures Guide aims to ensure that users have all the information required to provide complete clarity in how the platform is designed. Understanding the Exchange and its tools is the vital first step that users should take to give themselves the highest chance of success from their very first trade.  

The Guide is now live on our Support section, available to all.

Share It Far and Wide! 

This guide might not be required by everyone. But we all know someone who might benefit from this as an initial starting point.  Now, I would like to raise a call to arms – to those amazing supporters, please share the Guide with your friends and family who are interested in learning what Digitex is and has to offer. If you see others struggling, hopefully this Guide can serve as a starting point to help them along their way.

This journey has highlighted that the Digitex community is like no other when it comes to supporting one another. One year ago, how many of us would dare to believe that the first 570 traders would generate a daily volume of over $100,000,000. Now consider what we might achieve with another year of the same camaraderie. Let us continue to celebrate together, support each other, and strive for future success.

Latest News

Cryptrader

How to Use Leverage with Cryptrader

Trading
• Sarah Rothrie
June 3, 2020

Today, Cryptrader returns with another of his educational videos demonstrating live trading on the DFE mainnet. This time, he explains how to use leverage by calculating your desired position size based on a managed approach to risk. 

Cryptrader filmed this video yesterday when Bitcoin saw some of the most significant volatility since Black Thursday in March. After breaking the $10k barrier along with a multi-year line of resistance, crypto’s biggest asset fell dramatically in a matter of minutes. 

However, as you can see from the video, this volatility creates a feeding frenzy on the DFE! Our 24-hour trading volume topped 15 million contracts yesterday, which amounts to around $115 million traded by 320 users! As we onboard more users, it’s only a matter of time before the DFE is breaking volume records. 

Learning about Leverage

Cryptrader starts off by explaining the purpose of leverage – to allow flexibility in meeting position sizes while limiting counterparty risk and the risk of black swan events. 

To determine position size, you’ll need to consider your risk per trade, as a percentage of your account balance. Risking 1% of your account balance on any given trade is a reasonably acceptable rule of thumb. Secondly, you’ll need to know the number of ticks between your entry point, and your stop loss. 

Cryptrader illustrates the example using a trade of 1,000 DGTX and a five-tick difference between the entry and exit points. 

Now we can calculate the size of the position we’d need to take so that we’d lose no more than 1,000 DGTX if the market moves against us. 

The value of a tick is 0.1 DGTX, so to estimate the number of contracts in our position, we can divide by 10. This means if we select 2,000 contracts, a one-tick movement represents a gain or loss of 200 DGTX. So if we want to risk no more than 1,000 DGTX over a 5-tick movement, then 2,000 contracts is the right position size. 

Now we move to the leverage selection. As Cryptrader is currently set to 1x leverage with an account balance of 100,000 DGTX, and the notional value of one contract is around 190 DGTX, he only has enough in the bank to trade 527 contracts. By applying leverage, he can increase his maximum position size. In this case, he needs to dial up to 4x leverage to create a maximum position size of over 2,000 contracts. 

Changing the Leverage Mid-Trade

Cryptrader also illustrates what happens if you change the leverage when you’re already in a position. Doing this doesn’t alter your potential profits or losses, but it does change the liquidation price. Using only the leverage that you need means you get the maximum distance between your entry point and the liquidation price. 

By increasing your leverage, you’ll bring the liquidation price much closer to your entry point, creating a greater risk of liquidation. The flip side of increasing leverage is that you’ll reduce the amount of margin needed, thereby decreasing the value you’d lose if you do get liquidated.

If you have more questions for Cryptrader about how leverage can mitigate counterparty risk or black swan event risk, then you can tune in to one of his live trading sessions on YouTube and join the conversation!

June 3, 2020
Trading

How to Use Leverage with Cryptrader

Sarah Rothrie
Cryptrader

Today, Cryptrader returns with another of his educational videos demonstrating live trading on the DFE mainnet. This time, he explains how to use leverage by calculating your desired position size based on a managed approach to risk. 

Cryptrader filmed this video yesterday when Bitcoin saw some of the most significant volatility since Black Thursday in March. After breaking the $10k barrier along with a multi-year line of resistance, crypto’s biggest asset fell dramatically in a matter of minutes. 

However, as you can see from the video, this volatility creates a feeding frenzy on the DFE! Our 24-hour trading volume topped 15 million contracts yesterday, which amounts to around $115 million traded by 320 users! As we onboard more users, it’s only a matter of time before the DFE is breaking volume records. 

Learning about Leverage

Cryptrader starts off by explaining the purpose of leverage – to allow flexibility in meeting position sizes while limiting counterparty risk and the risk of black swan events. 

To determine position size, you’ll need to consider your risk per trade, as a percentage of your account balance. Risking 1% of your account balance on any given trade is a reasonably acceptable rule of thumb. Secondly, you’ll need to know the number of ticks between your entry point, and your stop loss. 

Cryptrader illustrates the example using a trade of 1,000 DGTX and a five-tick difference between the entry and exit points. 

Now we can calculate the size of the position we’d need to take so that we’d lose no more than 1,000 DGTX if the market moves against us. 

The value of a tick is 0.1 DGTX, so to estimate the number of contracts in our position, we can divide by 10. This means if we select 2,000 contracts, a one-tick movement represents a gain or loss of 200 DGTX. So if we want to risk no more than 1,000 DGTX over a 5-tick movement, then 2,000 contracts is the right position size. 

Now we move to the leverage selection. As Cryptrader is currently set to 1x leverage with an account balance of 100,000 DGTX, and the notional value of one contract is around 190 DGTX, he only has enough in the bank to trade 527 contracts. By applying leverage, he can increase his maximum position size. In this case, he needs to dial up to 4x leverage to create a maximum position size of over 2,000 contracts. 

Changing the Leverage Mid-Trade

Cryptrader also illustrates what happens if you change the leverage when you’re already in a position. Doing this doesn’t alter your potential profits or losses, but it does change the liquidation price. Using only the leverage that you need means you get the maximum distance between your entry point and the liquidation price. 

By increasing your leverage, you’ll bring the liquidation price much closer to your entry point, creating a greater risk of liquidation. The flip side of increasing leverage is that you’ll reduce the amount of margin needed, thereby decreasing the value you’d lose if you do get liquidated.

If you have more questions for Cryptrader about how leverage can mitigate counterparty risk or black swan event risk, then you can tune in to one of his live trading sessions on YouTube and join the conversation!

Latest News

Digitex Answers Your Questions on Margin Trading 3

Digitex Answers Your Questions on Margin Trading

Digitex Futures
• Christina Comben
July 3, 2019

With the cryptocurrency market making bullish signs and staggering gains, more and more people are thinking about trying margin trading. They realize that when the prices are moving upward, their chances of making profits are greatly magnified this way. But of course, there are no guarantees. Margin trading can be risky and lead to serious losses as well. Continue reading

July 3, 2019
Digitex Futures

Digitex Answers Your Questions on Margin Trading

Christina Comben
Digitex Answers Your Questions on Margin Trading 4

With the cryptocurrency market making bullish signs and staggering gains, more and more people are thinking about trying margin trading. They realize that when the prices are moving upward, their chances of making profits are greatly magnified this way. But of course, there are no guarantees. Margin trading can be risky and lead to serious losses as well. Continue reading

Latest News