Margin Trading in CryptoCurrency For Beginners: Learn How to Get Started

Disclosure: This post may contain affiliate links, which means we may receive a commission if you click a link and purchase something that we recommended. Read about Affiliate disclosure here.

By now, all of us know the fact that cryptocurrency trading is both risky and rewarding. One needs to be smart and learn the basics before putting a considerable amount of money on it.

Picture this:

You put $10,000 in crypto and a couple of days later, it is valued at $20,000! Wow!

But you need to understand that there is an equal risk of your initial investment getting reduced to $100 in a day or two. Yes, that’s right.

So it becomes important for us to discuss an important concept in trading which can be rewarding but also risky – Margin Trading.

But it’s not all bad if you use it properly to achieve your investment goals.

What Is Margin Trading?

What Is Margin Trading

Margin Trading is an act of borrowing additional money or cryptocurrency by leveraging the number of cryptocurrencies that you already own to buy additional cryptocurrencies.

Margin Trading is also referred to as margins or leverage trading and the idea is an old age method used in the traditional markets.

The concept was born in the US and is now practiced in numerous exchanges around the world and has been incorporated in the cryptocurrency world too.

But in traditional markets, there are many rules and regulations on margin trading, while the cryptocurrency margin rules are quite simple and not as complicated. The basic operating principle, however, remains the same.

Let me give you an example:

Assume, you want to make an investment of $2000 in BTC but you only have $1000. So now to bring in the extra $1000, you borrow that through the margin of 2:1 (2x, it means for every dollar you have, you will get extra one dollar to invest).

Now imagine the BTC price increases by 50%, and so has your investment. So the $2000 you invested is now worth $3000. You can liquidate and pay back $1000 to the lender and enjoy your profits of $1000. (Assuming 1 BTC costs $2000)

But on the flip side if the BTC price decreases by 50%, your investment of $2000 has also reduced to $1000. In this case, the lender needs to be protected and he/she has the first right to claim the remaining $1000, so this goes to the lender. Now, your initial investment of $1000 is also lost and now you are left with nothing.

So you see, this way, the margin can be very rewarding as well as highly risky and that’s why it is not recommended to margin trade until unless you understand what the risks are.

See this short video to understand more about margin trading:

Who Gives This Extra Money or Crypto Invest & Why?

I know what are you thinking. You are thinking who provides this extra money or BTC to the trader to margin trade and why.

Well, brokers or individuals here act as lenders and provide their money or BTC to margin traders on a fee or interest rate.

And whenever the margin trader’s portfolio performs poorly according to the agreed conditions, their position is automatically closed by the broker to refund and save the lenders so that they get their interests and principal first.

On the flip side, if the margin trader’s portfolio performs well, lenders are regularly paid their interests according to the trade terms.

And that’s why it is also called Leverage Trading

For example, 50:1 leverage, means $2,000 of equity/BTC is required to purchase an order worth $100,000. 400:1 leverage means $250 is required to purchase an order worth $100,000.

Now, I know some of you might want to know where you can trade cryptocurrencies on a margin.

Well, there are some dedicated margin trading exchanges for doing that.

Crypto Exchanges Providing Margin Trading Facility

Exchanges providing margin trading option for cryptocurrencies are:

Always remember one thing – margin trading is not for noobs and you need to take into account the wild volatility of the crypto market too.

That’s why always stick to basic investing principles and never invest more than what you can afford to lose.

If you are not a pro margin trader, first try the usual 1:1 trading (spot) on exchanges such as these: 7 Best Cryptocurrency Exchanges In The World To Buy Any Altcoins

That’s all from my side in this article and I hope you enjoyed it.

Now it is time to hear from you: Do you trade cryptocurrencies? Do you indulge in margin trading? Where do you trade or margin trade cryptocurrencies?

Please share this article with your network if you find it useful!

Further suggested readings:

Help us improve. Was this helpful

Thanks for your feedback!

5 thoughts on “Margin Trading in CryptoCurrency For Beginners: Learn How to Get Started”

  1. Scott

    Is Cryptocurrency our first step into a cashless society?

  2. Vallery Mou

    Thanks for introducing me to margin lending. It’s my first time of hearing about the topic and it sounds just as risky as many other aspects of cryptocurrencies.

    Question: between margin trading and crypto lending, which of them do you think is riskier. Lending seems more appealing to me though I’m still trying to dig deeper into all business aspects of cryptocurrencies before making a final choice. Would love to hear your recommendations ( if any).

    1. Harsh Agrawak

      Of course, as a beginner starting off as a lender is good but the earning potential is not that much.

  3. Gautam Roy

    Really useful content for me. I am Forex trader and wanted to invest in Cryptocurrency. This article helped me a lot to learn about.

  4. BBOD Trading

    Nice Blog, Great Information

    New According to me

    – Bitcoin
    – Ripple
    – Ethereum
    – EOS
    – IOTA
    – TRON

    are the top cryptocurrency now and ever
    Ethereum Margin Trading market is a world of endless possibilities.

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Subscribe to stay updated

Learn Profitable Crypto Trading and receive our free resources to master automated bot 🤖 trading strategies.

(We respect your privacy.)

Coinsutra logo

CoinSutra provides general cryptocurrency and blockchain information for educational purposes only. Content on CoinSutra’s website and social media is not financial, investment, trading, or professional advice. Readers should conduct independent research and consult a licensed advisor before making investment decisions.

CoinSutra does not recommend or endorse specific cryptocurrencies, projects, platforms, products, exchanges, wallets, or other offerings. Opinions shared by CoinSutra writers are their personal views only and should not be relied upon for financial choices.

CoinSutra writers are not certified financial advisors or brokers. Cryptocurrency activities like purchasing, trading, holding, and selling have inherent risks. Readers should exercise due diligence before participating. CoinSutra and its writers are not responsible for any investment losses from acting on website or social media content. Visitors participate at their own risk.

Scroll to Top