Things to know about crypto Margin VS. Futures Trading6 min read

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Trading cryptocurrency is becoming so widespread among people nowadays. But before doing any action in the crypto world each person must know the details of the operation.  Trading cryptocurrency is simple but there are some advanced trading features available.  How to use them and where to use them is the main question.

Here we are going to explain these two moods of trading, so by the end of this article, you will be completely informed of the differences and the use of this to different trading.

 What is exactly margin trading?

Margin trading allows you to make spot purchases and sales of cryptocurrencies.

In simple words, Bitcoin margin trading allows opening a trading position with leverage, by borrowing funds from the exchange.

In most cases, the exchange provides loans to the traders so they can multiple their capital to be used for margin trading. This way, traders can open positions with high leverage. The exchange doesn’t have many risks since every position has its liquidation price.  The liquidation price is based on the level of leverage.

margin trading allows traders to open crypto positions by borrowing funds. This will enable traders to leverage their positions with more capital.

Thanks to margin trading, traders can see bigger trading results on their positions.

How does margin trading work?

It’s simple. A trader must provide an initial deposit to a position, this is what we called the initial margin.

Advantages and disadvantages of margin trading

  • The obvious advantage of margin trading is that it can result in larger profits due to the greater relative value of the trading positions.
  • Margin trading is useful for diversification, traders can open several positions with small amounts of investment capital.
  • Margin account makes the process of opening a position for traders easily without the need to shift a large amount of money to their accounts.

Margin wallets

we all know that we need crypto wallets to hold, buy, sell and exchange cryptocurrencies. but did you know that you need a specific wallet for margin trading?

By default there are three main wallets each one for different features:

Exchange wallet

Margin wallet

Funding wallet

The margin wallet is a separate wallet from the main wallet. To do margin trading you need a margin wallet. The assets will first transfer to your main wallet and then from the main wallet, you can transfer them to any wallet and account that you want.

Each exchange has these different accounts for its users to use based on the operation they want to do

For start trading with the margin trades is a must to have the margin wallet there are two wallets on the market, the cross wallet that has 3x leverage and an isolated margin wallet that has 10x leverage.

Margin trading tips

Margin trading is risky, so it’s not recommended mood for beginners in crypto trading, we had gathered some must-read trading tips:

Start the trading with small amounts


just started margin trading?

Then take small steps, with small amounts. In case of failure, you won’t lose a great amount of your money.

Don’t put all your eggs in one basket

It’s better to divide your position into different portions and create a ladder of prices. In This way, you can reduce the risk while averaging down the entry price of the position. The same process also works for taking a profit. You can set up a ladder to take-profit levels.

Complete knowledge over fees and liquidations

Always be careful about your trading skills, it’s better to divide your positions and create a ladder of prices. Trading on margin includes ongoing fees, make sure that your profit is safe. This is also correct about the liquidation price.

Risk management

When trading on margin, set clear rules for the management of the risk, control the excessive greed. Take the amount that you want to risk into the account, always remember that the money you are investing can be completely lost. Set levels for closing positions, taking profits, and the most important setup stop-loss levels.

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What is Futures Trading?

Crypto futures are derivative products. Future or futures contracts are an agreement to buy or sell an asset at a later date for a fixed price. Futures contracts are binding agreements to buy or sell assets they represent for an already predetermined price in the future.
The traders that are active in futures trading, will participate in the market by being both long or short-term on futures contracts. They are mostly used by traders as a way to hedge other investments or to lock profits when trading in volatile markets. The futures contracts are mad made in an attempt to avoid market volatility.

Futures trading is a kind of bet. In other words, you are betting on the price movement of BTC that is parallel to the value of the contract without owning the asset.

Futures trading VS margin trading

Margin traders buy and sell, so place an order on what is known as the spot market.

Futures contracts are traded in the derivatives market. The trading of the futures contracts is based on the deliverance of an asset on a future date. Futures contracts are not traded on the spot.  The spot market is in simple words the market where assets and financial instruments such as commodities, currencies, and securities are traded instantly, on the spot.

Both of these trading whether margin trading or futures contracts allow traders to see bigger profits with the use of leverage. Which also means a bigger risk course. Both Margin and futures will charge users a trading fee.

Margin and futures trading are in two different markets.

If you are thinking of developing an exchange website and you want to add Futures and Margin trading to your platform then you have to consider that adding margin and futures features may affect the cryptocurrency exchange software development cost.

Futures or margin trading which one is better?

We can’t say it 100% sure. But it depends. It must be mentioned that most crypto traders prefer margin trading to futures contract trading.  The reason must be the bigger risk factor of futures. Traditional commodities and stocks do not fluctuate wildly like the crypto market, which is known for volatility.

Margin trading Is still risky of course but crypto traders prefer it because they feel that margin trading gives them more control. A trader can engage in this form of trading within a short time frame and sell at the right moment when the price increase. And it can be done because as we mentioned before margin trading is done in the spot market.

But to answer the question that which one is better I have to say please do your search before taking any action.  It will be so risky if you jump into any of these trading positions without complete knowledge of the functionalities and how they work. This will end up losing all you’ve got.

A little advice this market is so risky so please invest the amount of money that you can afford to lose.

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Best bitcoin and crypto margin trading features

Binance Futures:  Binance provides futures features with various ranges of tokens and prizes. with the help of the Binance clone script, you can also add the futures feature to your exchange and work globally.

Houbi futures

Kucoin futures

Poloniex

Bitmex

Phemex

Bybit

Kraken margin

 

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