Margin trading is an issue that has recently gained considerable popularity in the world. Events such as the r / wallstreetbets scandal and the growing popularity of Bitcoin have effectively attracted investors’ attention to this form of investment. BTC margin trading is still a kind of novelty. Today, however, we will take a closer look at it and check if and how much you can earn on it.
BTC Margin Trading
What is margin trading? We answered this question indirectly in previous entries. The essential elements of margin trading are leverage trading and margin trading. Together, these two elements form the basis of margin trading.
As a reminder, BTC Margin Trading allows investors to borrow funds from a broker for investment while paying a margin. The percentage of a trader’s total contribution is determined by the level of leverage. For example, a leverage ratio of 1: 100 specifies the margin of 1% of the total value of the order.
Although margin trading comes from traditional financial markets, cryptocurrencies have become a very interesting niche for this form of investment. There are already specialized platforms on the global market that support this form of investing. A great example is the Polish project Geco.one. Poles have been developing their platform for some time, offering a leverage of 1: 100 on the most popular cryptocurrencies.
Margin trading is primarily a short-term investment strategy. Therefore, an important aspect is the lack of price slippage resulting from the exchange rate differences of the traditional order book. When trading with leverage, it is worth paying attention to whether the given exchange reduces such risk. With platforms like Binance, leverage trading relies on a traditional exchange. Geco.one however, it focuses only on margin trading – we will not experience a price slippage there, liquidity is provided by an external provider.
Earning on Margin Traging
The story is full of tales of huge gains from margin trading. Let’s look at the profit scale based on the example below:
- We buy 10 BTC for $ 10,000 apiece.
- Total investment is $ 100,000.
- For trading, we will use a trade with a leverage of 1: 100, which will result in the required margin being only $ 1000.
- Suppose BTC increased its price by 10% – it is now worth $ 11,000. Let’s sum up our bill!
The total value of our investment is now $ 110,000 – this means that thanks to our deposit of $ 1000 we managed to get a return of $ 10,000 (no commission). The return on investment is therefore as much as 1000%!
However, it should be remembered that in addition to great financial successes, there are also losses on the platforms. Therefore, it is good to think carefully about your investment strategy. When asked if Margin Trafing is profitable, Kamal, a Quora user, replied.
Margin trading is a sword with two blades. If you are right about your investment decision … margin trading will give you more than you could get with the same money without using leverage. However, things can turn around if you misjudge the investment. Should anyone stay away from margin trading then? Definitely not. However, jumping into the enthusiast’s car is also undesirable. Everyone should make their own judgment on the subject and draw the benefits and risks.