What is Margin/Leveraged Trading?

There are several ways to trade cryptocurrencies. If you've been trading cryptocurrencies, you've probably heard of margin/leveraged trading. That trading means trading derivatives.

That trading can be difficult. But it's simpler than you think.

Margin Trading

Margin is trading with funds provided by a third party. Unlike regular accounts, margin accounts allow you to invest more money. Basically, the margin allows you to realize greater returns on successful trading. Because of these characteristics, many investors use margin trading.

To start margin trading, you need to commit assets equal to a percentage of the total order. These initial funds are called margins. Margin is closely related to leverage. Leverage refers to the percentage of funds borrowed for margin. For example, to start a $100,000 trade with a 10:1 leverage, the orderer needs to commit a $10,000 margin.

In margin trading, there are long and short positions. A long position is a bet that expects an asset's price to rise, while a short position is the opposite of a long position. If an asset moves in a different direction than expected, it may be forcibly liquidated. To avoid liquidation, additional margin payments are required for the loss of the fund's investment principal. This is called a margin call.

Leveraged Trading

When trading with a margin, you can expect big returns with a small investment by using leverage. Leverage is usually expressed as a percentage. x10, x50, x100...

A loan market is also essential for this type of trading. Users borrow margins from centralized crypto coin derivatives exchanges when doing margin/leveraged trading. Of course, interest on the margin will also have to be paid later.

Gate.io provides easy margin / leveraged trading services.

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YB(Gate.io Marketing Agent)'s a comment

Margin trading obviously increases your profits in successful trading. But you have to take a high risk.