How BitMEX Margin Trading is Beneficial?

BitMEX (Bitcoin Mercantile Exchange) is one of the most popular and recognized crypto trading platforms known for margin trading. As the name suggests, this platform offers crypto trading through Bitcoins and suits perfectly for professional traders. Here we will discuss how margin trading works in BitMEX and how to remain profitable in this volatile crypto trading market while trading with leverage?

It is always worth remembering that trading with leverage or margin trading is profitable for professional traders, and not for beginners. Despite offering large potential gains, trading with leverage is quite risky and it’s important for the traders to trade this kind of trading carefully. BitMEX is one of the most advanced trading platforms for cryptocurrency trading considering its high liquidity levels and great performance.

BitMEX works with crypto derivatives considering it offers a tool which can be sold and bought on margin trading. At this platform, users will be trading actual Bitcoin and Altcoin contracts which derive their value from the price of their respective crypto assets. This kind of trading is useful to users who don’t have sufficient funds to perform large trades but they are certain about the specific direction of the market.

So, what the hack is margin trading?

Margin Trading

Margin trading or trading with leverage is the practice of trading crypto assets using borrowed funds from third parties. In general, this kind of trading is used by professional or expert traders to perform large trades.

When you perform margin trading, you can access the increased buying power and may open the positions which are much larger than your current account balance available for crypto trading. Let’s understand it with an example:

Say, you have 10 BTCs available for trading in your account, and you want to place a trade with margin 10:1, you can open a position worth 100 BTCs. This further means that if the market moves in a favorable direction, you will access 10 times profit. However, on the other side, it also has the effect of magnifying losses as there are chances that the market may move against you.

The assets provided by the trader would work as collateral for the borrowed funds. This is very important for the trader to know about collateral and other terms at the time of margin trading.

How does BitMEX margin trading works?

BitMEX is the popular crypto exchange that allows its traders to trade with the leverage of up to 100:1, providing traders’ opportunity to increase their potential gains. However, the amount of leverage that you can access also depends on your initial margin, and the maintenance margin.

With leverage trading, you have two options:

•     Going long- It involves buying a contract as you believe it will increase in value.
•     Going short- It involves selling a contract as you think that its  price will move down, and then you can buy it back at the reduced prices later.

Whenever you open a position at BitMEX, a portion of your account balance will be held as collateral for funds which you have borrowed from the exchange. While BitMEX offers several cryptocurrencies to trade, all the profits and losses are settled in Bitcoin only. Therefore, users have to deposit and withdraw funds in Bitcoin only rather than dollars.

To leverage trade on BitMEX, you need to follow the below steps:

1.      Register for a BitMEX account first.
2.      Deposit funds into your account.
3.      Navigate to the trading screen by choosing the Trade link present at the top of the screen.
4.      Enter the details of your position in the order box section.
5.    Use the slider below the order box to set the desired level of leverage.
6.       Review your transaction details by clicking on the Quantity field.
7.       Open your position by going long or short.

Benefits of BitMEX margin trading

Do you know why pro traders prefer BitMEX margin trading? Here are the reasons:

•          User-friendly platform
•          Low fees
•          Easy to handle user interface
•          Supports all the advanced and professional order types
•          Trading engine works smartly without any glitches

Trading on BitMEX is a bit different from other platforms as these platforms allow you to directly trade the coins in your account meaning you directly buy or sell BTC while you execute orders.

But on BitMEX, you open a position wherever you think the price will go on, so as to gain the price difference as your profits in case the trading goes successful. You are buying contracts for long or short trades and every trade must be closed at some point, i.e. your target.

This platform employs two different methods of margin trading including:

•          Cross margin
•          Isolated margin

Cross Margin

It allows you to use all the funds in your margin trading account to prevent liquidations. In certain situations, you may lose more than your initial margin for a particular position, but this kind of trading will also prevent you from liquidation.

Isolated Margin

The isolated margin can be used for opening short-term positions and take instant returns. This method opens a position with a liability of only your initial margin.

Yes, this type of trading only puts your initial margin at risk. As in the case of liquidations, it doesn’t use any of your account balances. So, It can prevent extra losses but cannot prevent liquidations.

Important risk management tips for BitMEX leverage trading

As we all know that trading with leverage is risky, here are the key points to minimize the risks with such trading:

•          Start with a smaller amount
•          Limit your margin/leverage
•          Pick up the market and understand your order
•          Use limit orders instead of market orders
•          If you are a beginner, avoid leverage trading

Conclusion

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Created on Oct 23rd 2021 06:08. Viewed 296 times.

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