Fundamentals Of Leverage Margin Trading In Crypto Currencies

Crypto Margin Trading In Layman's Term

This guide shares the fundamentals of the positions & strategies used in the leveraged crypto margin trading. No matter what pair you're willing to trade in, be it in bitcoin or other altcoin, these fundamentals can be applied to all. 


Sounds good! Ready to rock? Let's get started:

As with any other form of serious trading, it always pays to have a strategy before investing your money. And the same applies to the cryptoverse.

Related Post: Friendly Introduction To Leverage Trading

Unlike ordinary stocks and shares, cryptocurrencies tends to lose or gain its value over a short period of time due to their high volatility rate.

The latter means, you can make a huge profit or lose in the shortest amount of time. Therefore, it is important to have a good knowledge & a solid plan in mind before getting involved in leveraged intraday trading.

So, Here are some of the key strategies & positions you may want to consider to enrich your trading experience.
Long Position Trading Strategy – 
Basically, taking a longer position on any asset means that you expect the value of that asset to increase in the near future.

Suppose you predicts the price of a particular assets will be higher at some point in the future as compared to forecast period and it happens as anticipated so you'd be in profit.
Similarly, a leveraged long position allows you to experience a far greater rate of profit from this increase than you would if you'd have made an un-leveraged trade.
Let's understand this with an example. Say, you took a long position in an assets that was worth $1000. However, at the time you closed your position, the price rocketed to $1500 which would result in a pure profit of $500.
But, if you make a leverage trade at 10x. This would allow you to buy $10,000 worth of the crypto despite of investing $1000 of your actual money. 

Now according to the above calculation, the price of that particular asset will be $15000 at the time of closing the position resulting in a profit of $5000.
Short Position Trading Strategy – 
Short positions involve betting that the value of a cryptocurrency will decrease in future. 
Let’s say, for example, you have noticed a pattern in the value of a particular cryptocurrency. It tends to fluctuate fairly predictably, rising in value by 20% before nosediving.
If you are sure that the price of the crypto is about to dip, you would open a short position. This would result in profit if the assets price falls as you had anticipated.
Similarly by making a leveraged short trade, you will be able to short a larger amount of the crypto than you actually possess, which which eventually leads to higher profit irrespective of the downfall.
Hedging In Trading Strategy – 
Hedging is a crypto margin trading strategy which seeks to protect you from loss.
Say, for example, you had a long position in a particular crypto. And you felt fairly sure that its value would rise over a period of time. 
However, due to the volatile nature of the crypto market now you find that it could dip in the short term. 

So, to limit your losses in such a scenario and maximize the profit, you open a relatively small short position in accordance with your primary long position.
Most crypto exchanges don’t allow you to directly hedge. However, there are couple of ways you can get over this restriction. One is to open conflicting positions in a crypto using different currencies. 

For example, you go long on the value of Bitcoin to the dollar and later realized the value is falling so to limit your loss you'd take short position on Bitcoin to the euro at the same time. 
The other way to get around this restriction is to hedge different positions on different exchanges.
That would be all, I hope you find this post helpful. Please let me know if there is anything you'd like to add here in the comments box. 

I will be more than happy to read and know your inputs. Thank you!

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