There are several ways for a person to dive into the trading cryptocurrencies pool. If you are an agile trader you might have heard about concepts like shorting bitcoins, margin trading, or trading with leverage.
Margin trading might seem so complicated from the outside unlike what most people believe it is not as complicated as it looks like. Everybody knows the crypto market comes with the high volatility that happens because of price fluctuations.
However, with margin trading, price fluctuations can be an ideal opportunity for traders to gain profits.
What is Margin Trading?
This world of margin trading can be quite complicated for beginners in the world of trading. This concept is used to be common in markets with low volatility and slow activities. To say it in simple words, a crypto margin trade enables the trader to borrow capital and increase their power for buying assets. With the capital, they borrow they can open bigger positions than the positions they could open with their own funding.
Most of the time when we hear the phrase “margin trading” what comes next is the word “leverage”. The question is what is leverage in margin trading?
Leverage is the Factor by which traders will multiply their position.
If a trader opens a trading position with 100X leverage, their exposure and gains will be multiplied by 100 times.
Margin trading looks very attractive at first sight. Increasing profit with 100X leverage looks like an interesting deal for any trader. But that’s not all there are some drawbacks too. Borrowing leverage will also increase the risk near the same amount.
Advantages of margin trading
Margin trading has a high risk. There are several risks that need to be considered before opening a position. The first one is that the crypto market is mostly unregulated in comparison to traditional markets.
This put the market in danger of price manipulation, especially in crypto margin trading. Market movers are traders who influence the market because of the large amount of capital they hold.
They can take positions that can affect margin trading positions, this will put traders at high risk especially the crypto margin traders.
A trader with high leverage in crypto positions operates in a shorter liquidation window. One needs to calculate potential price movements that would cause the liquidation of the trading position. There are some trading tools that can help to calculate these risks.
- Margin trading in cryptocurrencies may be crucial for gaining some profits as it gives more access to funds by the leverage and the fund you can borrow and repay them with little interest. In this way, traders can gain more profit if the market goes in the right direction.
- With margin trading, you feel the freedom to open a position even with a small amount of capital, that otherwise not be possible because you are using some form of leverage.
Disadvantages of margin trading
- As simple as you can earn benefits from having leverage, you can lose much when the market goes against your choice.
- You should expect significant losses when the market goes down, and you end up being on the wrong end. In simple words, cryptocurrencies with more volatile markets can bring more losses even in smaller investments.
KuCoin is one of the famous exchanges in the crypto market, It has various trading features that users can use and choose the feature they want to trade with. here we are going to read about margin trading and different types of it in Kucoin. Kucoin clone script is a fast and secure way for entrepreneurs who want to develop an exchange like Kucoin with all its features and functions in the short time
Now let’s see how does trading in kuCoin work?
KuCoin has launched its margin trading services in 2019, where users can trade all kinds of cryptocurrencies with up to 10X leverage. Now let’s see how we can trade in KuCoin?
Margin trading on the KuCoin platform is relatively upstanding. So let’s see how it works;
Step 1: Visit the official website of KuCoin and sign-up.
Step 2: then you have to enable a margin trading account. For doing this, when you log into the Kucoin website, click on “trade” and select “margin trading”.
Step 3: then in this part, you need to deposit funds on the margin account after depositing funds, then you have to choose the type of trading you want to execute –spot, futures, and margin trading which has two styles: cross margin and isolated margin.
we will explain the difference between a cross and isolated margin in the following but for now, let’s stick to the steps.
Step 4: Then it’s time to choose the order type you want to start the trading with based on your analysis.
Step 5: when you gain profit, then it’s time to return the funds you have borrowed funds, there are two methods for paying back the assets you have borrowed. First, one is to repay the loan on a time priority basis which means you can repay the borrowed tokens first. Or you can replay on an interest rate priority basis, you repay the tokens with higher interest first.
Cross margin Vs Isolated margin
cross margin: margin is shared between open positions with the same settlement cryptocurrencies. In cross margin mode, the margin is shared across the user’s account. Cross margin uses the whole cryptocurrencies which is available in the account to prevent liquidation.
Isolated margin: The isolated margin position is not dependent on the number of funds in your account or your borrowing history. In Isolated margin, any Available Balance you may have will not be used to add margin to your position. By trading with the isolated margin mode, you can limit the losses to the initial margin set, this will help the short-term speculative trade in case they turned out to be incorrect.