3 Powerful Ways to Use Crypto Margin Trading

For that is used cryptocurrency margin trading they will understand that it is an essential tool that is capable of opening up powerful opportunities for the reduction of risk and increase in successful trades in the cryptocurrency market, and that far from the misconception that it used to have that it is a risky way of trading it is in fact far from that.

Professional crypto traders use margin trading in a number of specific ways in order to unlock powerful benefits and advantages, and while there are many different benefits of using margin trading and a range of different use cases, there are a few specific ways of using crypto margin trading that are common commonly used and that yields a high levels of value.

In this guide we're taking a look at three powerful ways to use margin trading in the cryptocurrency market, starting with a look at what it actually is and how margin trading improves trade outcomes, and finishing off with a look at three powerful ways to use crypto margin trading in 2021.

Why is Crypto Margin Trading So Popular in 2021?

Cryptos are decentralized assets of monetary value that exist in digital form and similar to traditional money can be exchanged for goods and services from providers accepting them, they are also popular among retail and professional investors wanting to increase earnings and diversify portfolio holdings.

Crypto markets can often be leveraged for profits using tools conventional to other markets with one being the ability to margin trade assets, this is the process of leveraging borrowed liquidity from lenders to increase the position values beyond what cash holdings could allow, thus increasing potential profits.

Margin trading is the strategy of using borrowed funds to scale the size of trades and produced profits, margin trading is all about increasing gains from winning trades and is more popular in 2021 than ever before as it allows fund-limited traders with low buying power to use small sums for high-gain profits.

Leverage amounts differ from one trading platform to the next though no matter the size leveraged can produce exceptional gains as for example, a trader with $500 on a 10:1 leverage can open a position and reap the profits of a $5,000 investment, the $4,500 is borrowed from the lender and the rest funded by the borrower which is held by the broker as a form of collateral.

What Actually is Crypto Margin Trading?

Margin trading, or leveraged trading, is the art of profitably using borrowed money to open positions at values greater than what cash holdings permit, margin trading can amplify losses beyond the cash put in if a declining position is not closed fast enough but winning wagers exponentially increase earned gains.

With $500 on a 10:1 leverage a trader can reap the rewards of a five-thousand-dollar position and when strategically executed can be highly profitable, margin trades can be even more rewarding when higher leverages are used, Binance, for example, supports up to 125x leverage which can reap great returns.

Simply put, margin trading is when you borrow funds from a broker or exchange in hopes of their values rising though assets remain under the ownership of lenders as collateral, it is done to raise the stakes to values beyond cash-held amounts which means small amounts can reap the gains of larger investments.

Margin trading can amplify profits and losses and is why it is best for seasoned traders that know the market and its ability to sharply move at any moment, though if you have a hunch that a coin will rise and have the data to justify your projection, margin trading is a good way to raise stakes and potential profits as a fractional up-front investment can open positions capable of returning much higher profits.

How Does Margin Trading Improve Trading Outcomes?

Maximise Revenue

Maximizing revenue is the goal of all traders and investors, no matter the market they are in, and this is what margin trading enables people to achieve given that users can open positions at values otherwise not possible, the ability to use little sums to produce large returns is a very compelling investment offer.

Margin trades allow investors to maximize their revenue and earnings as when using this trade will use borrowed funds to increase the value and profits of positions, by investing a small up-front investment to form collateral for the borrowed funds, users can reap the profits of larger positions for little money.

Profiting from margin trades is dependent on the investor’s knowledge of market trends and volatility as the hype, news, and development surrounding an asset largely influences its price, by not studying the coin or the market as a whole, projected valuations can be wrong and losses nothing short of imminent.

Margin-traded cryptos have much greater profits when appreciating in value than spot-traded coins as the value of the position is more than the amount of cash added to it, the $100 you put in a traditional order can be put in a 10x leverage trade to generate the same profits of a thousand-dollar position, as such, margin is a great way to increase profits and is one of the most popular trading methods of 2021.

Profit From Drops as Well as Increases in Price

Despite the risks associated with investing in crypto and the misconceptions surrounding the space, it is an investment opportunity in which profits can be had from both rising and falling markets, depending on the trade type used, in this case, margin trading, both market conditions can be leveraged for profits.

One way to gain from falling markets is to short-sell a coin you think will fall in value over time, whether that be in the short or long-term, short selling is the practice of betting that a coin will fall in value and if correct will be able to profit on the spread between the price you sell and repurchase the crypto at.

Short-selling is a good way to mitigate losses as unlike conventional trades that profit from rising prices, shorting an asset is the art of liquidating crypto before its price falls or declines more, this is not only a good way to prevent losses but a great method to recover losses from dips that already took place.

Whether a coin is falling or appreciate in value it can be traded for profits if foresight is accurate and if using limit orders that place trades at predefined prices on behalf of traders, using limit orders you can have the exchange execute orders for you once an asset reaches a minimum or maximum price so no matter the direction markets head the ability to profit remains.

3 Powerful Ways to Use Crypto Margin Trading

Use High Leverage to Increase Gains on Successful Trades

There are a number of platforms in the cryptocurrency market that provide margin trading today, however many of those provide relatively low levels of margin of leverage that do not open up the kinds of opportunities that can be taken advantage of by using some platforms that provide high leverage.

PrimeXBT is one platform the cryptocurrency market that provides industry-leading leverage of up to 100X on a range of cryptocurrencies that included BTC, ETH, LTC, and EOS, as well as up to 500X on a range of the leading traditional assets like stock indices such as S&P500 and FTSE100, forex pairs such as USD/EUR and AUD/CAD, commodities such as gold and oil.

By using PrimeXBT to engage with the cryptocurrency market there is the ability to take advantage of higher levels of leverage to more efficiently use margin trading and to get the highest return on investment possible on successful trades.

While there are many trading platforms in the cryptocurrency market that provide some leverage many platforms only provide low leverage of anywhere as low as 2X or 5X, with this being self-sufficient and with PrimeXBT's 100X leverage on cryptocurrencies providing the optimal tool for being able to more effectively trade cryptocurrencies with margin.

Create Hedged Positions with Margin Trading

Hedging is pursued by investors in an attempt to mitigate investment risks attempted by buying in to opposing assets with the hopes that gains can offset initial losses, if a held asset starts to decline in value you may be able to recover those losses by re-buying the asset at a lower price and waiting for it to rise.

Hedges are essentially investments made to reduce the risks imposed by adverse price movements and is typically done by assuming an offsetting position in a related asset, most exchanges offer three unique trade types including spot, margin, and futures, and knowing the differences of each is very important.

Traders that say they are fully hedged mean they have short and long positions open at the same time which is done when the direction a market is heading is hard to speculate, if the price of a coin suddenly declines, the trader will earn profits on the short position but will take a loss on the one that is longed.

If someone closes a trade due to market uncertainty they would then hold a stablecoin like USD Tether which holds its value and as it is not influenced by volatility, if the price of the asset drops the trader is still hedged as they can re-buy the coin at a lower price to reap profits, which is true for spot trades too.

Short After Pumps

Shorting is a great way to profit from assets with declining values and especially those that have low trading volumes but sudden spikes and movements in price, coins that quickly rise in value due to hype are known as being ‘pumped’ coins and these often quickly retract as early investors sell to lock profits.

Cryptos differ from fiat currencies and other monetary assets in that they have no intrinsic value and are not backed by physical commodities like gold or silver, due to this, most of the values are driven by hype and community speculation in the assets ability to grow and be used in real-world applications and uses.

Pumped cryptos are at times the result of coordinated efforts from investors in crypto groups across the net that publicize and speak highly of the potential a given coin has, such coins may rise in value but as more people buy in the more holdings are sold by early-on investors wanting to secure their easy gains.

This presents a unique dynamic and profitable opportunity as quickly-inflated values tend to quickly fall which means profits are to be had by shorting pumped coins, by shorting a coin, you sell held assets and then re-buy them at a later date once its hype and price finally settle, the difference between is profit.

In Summary

While there are many different ways of using margin trading the cryptocurrency market in order to gain optimized outcomes, we have listed three of the most powerful ways of using it in order to dramatically reduce risk and to be able to achieve higher levels of return on investment as well.

Using high leverage to increase gains on successful trades, trading hedge positions with margin trading, and shorting off the pumps, are three of the most commonly used and powerful ways of gaining advantage of the rest of the cryptocurrency market with the use of margin trading.

If you like to learn more about a professional crypto margin trading platform that provides the highest leverage in the industry, check out PrimeXBT.