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October 4, 2022
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What is a margin deposit? –

In the world of trading in derivatives, also on the Bitcoin market, Margin Trading (margin trading) is attracting more and more attention. This risky form of trading has found many supporters also in the cryptocurrency market. There are exchanges around the world such as BitMEX that specialize in the area of ​​cryptocurrency leveraged trading. Giants like Binance also provide their clients with the option of trading with margin. This tool is also popular in Poland, as evidenced by the rapid increase in popularity of Geco.one – a native trading platform specializing in margin trading. But what is a margin deposit? What is margin trading? First, let’s answer these questions.

What is a security deposit?

The concept of a margin is inextricably linked to the term leverage. Therefore, we encourage you to read our earlier article first. The margin or margin level in English is called a margin. Literally translated, we would refer to this term as a margin or reserve.

The entire margin trading process is based on borrowing money from an intermediary in order to make an investment. In order to make a position on an investment at all possible, traders are first required to pay an appropriate margin. Such deposits are divided into two types – initial deposit and proper deposit.

Initial deposit is the value that the investor contributes before placing an order for futures. This process is carried out by blocking the amount of money on the investor’s account. In this case, we do not entrust any money to other people.

The second type is proper deposit. The appropriate margin is the minimum value of funds that must be kept on the account by the investor. Further, as a result of movements in the chart of our investment, the value of the deposit may go up or down. It may happen that the value of the deposit drops below the appropriate margin – then the brokerage house / broker may call the investor to replenish the funds.

However, it is a good practice in the margin trading market to close an investor’s position before it causes a negative balance, which would expose the investor to additional losses. This security is used, for example, by Geco.one.

How to calculate the margin?

As we wrote earlier, the calculation of the margin level depends on the level of the applied leverage. Calculation of the margin when trading Bitcoin on a leverage of 1: 100, 1:50 and 1:10 is really not difficult.

Increasing the leverage on a given investment consequently reduces the amount of margin an investor has to pay. And so – for a leverage of 1:10, the margin amount will be reduced to 10% of the total value of the order. The same applies to other levels of leverage:

– 1:50 – the broker requires a margin of 2% of the order
– 1: 100 – 1% of the order value

Leverage – high profits, high risk

Remember that lowering the margin and playing on leverage involves a high risk. This investment opportunity gives investors the chance to earn great earnings even with a low own contribution. Unfortunately, there is a risk of significant losses in the event of failure of the investment.

It is worth bearing in mind that on the platform geco.one, which gives the possibility of leverage, you can also make transactions in a safe way, i.e. if you deposit 0.1 BTC and operate positions that do not exceed your balance, then we do not really use leverage.

However, we have a number of other benefits, such as:

  • Very fast execution of orders;
  • No price slippage;
  • Possibility to use several types of orders that are not offered by SPOT exchanges;
  • The ability to play for declines on a given cryptocurrency;
  • Trading on a very low spread.

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