Simply explained, margin trading is taking out a loan in order to maximize the profits you can gain from market movements. This is done when you anticipate that the market will move in a certain direction, and are willing to take on a risk in order to maximize potential profits. Margin trades are opened by putting up a base collateral amount and taking out a loan of multiples of that base amount, known as leverage. For example, a 2x leverage would mean taking out a loan for twice the amount of the base collateral, 15x would be 15 times higher, and so on. The higher the leverage, the more risk is involved, and the higher the interest on the loan will be. In order to margin trade, you open and fund a margin trading account separate to your regular trading account. This prevents your regular trading activity from being disrupted if your margin trading account falls below minimums.
Exchanges set margin account minimums in order to mitigate potential losses. If the value of your margin trading account goes below the minimum set by the exchange, you will receive a notification known as a margin call which will prompt you to deposit more funds in the account in order for it to remain solvent. If this is not done, then the exchange will liquidate the account to prevent further loss.
Margin trading can be risky, so make sure that you have taken the necessary steps to minimize your risk. A couple of common risk-minimization strategies are stop-loss and take-profit orders. Setting a stop-loss means that your margin account will automatically liquidate when the market falls to the level you set. This lets you accept some losses to avoid much more severe losses later. Taking profit is similar though in the opposite direction. Setting a take-profit order sets an upper price limit at which your margin trade will be liquidated. While this puts a limit on how much you could stand to gain from the trade, it also locks in profits in case the asset price falls again.
Setting stop-loss and profit-taking orders lets you set a predetermined range of risk and reward that you’re comfortable with: losses you can accept, and profits high enough to make it worth the risk incurred. Operating within the boundaries set by a stop-loss and profit-taking adds some stability to the inherently volatile prospect of margin trading.
Margin Trading with Dash
Dash can be used in margin trading, and you can deposit and have your balance confirmed much faster when using FastPass partners. For example, say you anticipate the price of Dash to double over a given period of time. If you have $100 and seek a profit of more than $100, you can open a 2x leveraged trade and invest twice as much. If your prediction is correct, this could net you a profit of $200 minus interest and trading fees.
Keep in mind that cryptocurrency markets are more volatile than traditional financial markets, meaning that while you could stand to gain more by investing in this space, the risks are much higher as well, and so you should plan to manage your risk accordingly. Typically high rewards are gained through an activity with high risk.
Margin Trading on HitBTC
To set up a margin account on HitBTC, of course you would be required to first set up an account with HitBTC (click here to be taken to HitBTC).
IMAGE OF ACCOUNT SIGN UP
- Then ensure that you have funds deposited in your trading account. To deposit funds Go to your Account page or just click the green “Deposit” button in the top right corner of the main window.
Find the cryptocurrency (use “Search” field at the top) and hit the button in the “Deposit” column. This will generate your wallet address.
Copy and paste this address at a third-party service to initiate a transaction.
Once your funds reach HitBTC, you will see a pending transaction at the very bottom of the Account page, in the “Latest transactions” section.
The funds will be reflected on your balance shortly.
2. On the top menu bar, click on “margin,” then click the green “margin” button on the top-right of the screen.
This will open up a pop-up where you can enter the amount of collateral you wish to move from your trading account to your margin account.
3. Press “transfer” when you have entered the desired amount. This will give you a buying power of your collateral amount multiplied by your leverage. You can add more funds to your collateral amount at any time by going back and pressing the green “margin” button.
You can then place margin orders similarly to placing spot market orders. Your total buying power resulting from your collateral amount multiplied by your leverage is the total amount that can be used to open a margin order. Here you can also set your stop-loss and take-profit limits.