Step 1, Buy Bitcoin
Step 3, PROFIT!
Well… it's not that easy at all is it? I got into cryptocurrency because I truly saw the potential for financial freedom and reform through Bitcoin & blockchain tech. Does that mean that I don't enjoy taking some profits or HODLing some crypto for down the road, no it does not! While profiting is not my main reason for being in the crypto world (hint: education of this epic financial shift IS why I do this), it is still nice to make a profit from your trades. If Step 1 is buy Bitcoin and Step 3 is Profit, then Step 2 MUST be: Margin Trading.
Quick Overview Of Margin Trading
Margin Trading is just a fancy word for “borrowing money”. People who margin trade are essentially borrowing money from their cryptocurrency exchange of choice (not all exchanges offer this), to use for trading. Does this sound like a bad idea? Yes… yes it does to me, BUT if you are an experienced trader (or the more adventurous type) you certainly can make some nice profits from margin trading.
There are a few things to consider when margin trading. While most trades you execute are a 1:1 ratio, with margin trading you can leverage 2:1 (2x), 3:1 (3x), 20:1 (20x), or even 100:1 (100x). This is risky business and if you don't do your own research and homework you can quickly end up owing money you don't have. When you take out a margin position you will have to pay back the money you borrowed AND a there are associated interest fees along with the typical fees that an exchange requires to take out a position. All these fees and the original amount need to be taken into consideration when attempting to margin trade. Typically, in order for the exchanges to ensure they get paid back, when your trade hits the “maintenance margin” they will “call in” your margin position once you hit a price where you would be actually losing money. This is what we are trying to avoid, but if it gets to this you can contribute more funds to the margin position so it is not called. Did I say this was risky business yet?
The Long & Short Of It
When you place a margin position you can also decide to go “Long” or go “Short” with your bet (and it truly IS a bet). Going short or “Shorting” is a bet on the price going down, so if the price actually goes up then you lose. Going Long is a bet the price will go up, and once again you lose if it does the opposite and goes down. This is, once again, risky business and you really need to know what you are doing in order to take advantage of this. I do NOT recommend margin trading (short or long) to beginners in cryptocurrency, but regardless it is part of the system so you SHOULD at least learn about it.
The Best Crypto Exchanges For Margin Trading In 2018
For those interested in looking a little more into margin trading, I have put together a list of the top cryptocurrency exchanges that offer margin trading. I am not as familiar with some of these exchanges as others in my previous top exchanges list so please do make sure to read up on each exchange before doing margin trading.
- BitMEX – This is THE most popular spot on the web right now to margin trade. Up to 100x leverage for BTC or 20x + for other coins. If you are in the US you will need a VPN to access the site (I use Hidester, and its easy to use and very affordable!)
- CEX – This centralized exchange has been around for a LONG time, and while fees are a bit on the high side they are a long standing and reputable exchange that offers up to 3x leverage for major trading pairs.
- eToro – They have a great user-friendly interface, offer up to 400x leverage (not all coins), but they also offer exposure to stock trading and ETF, commodities, and more.
- Kraken – This San Francisco based exchange is a bit hard to use in my opinion, but you can get up to 5x leverage. Fiat deposits & withdraws are available, but not the cheapest!
- WhaleClub – I have the least experience with this site, they have ZERO trading fees, but fees for margin trading are a little high. You can get up to 20x leverage here. What I LOVE about them is they have a “Demo” feature where you can do test trading in real time to learn without risk!
- Poloniex – Recently aquirred by Circle investing, this US based exchange has margin trading up to 2.5x. While that is a bit low, I actually really like their interface for margin trading and it's easier to understand than most.
- HitBTC – This is one of the more popular exchanges on this list and they have a ton of coins to trade. You can get up to 20x leverage here, but there are some hoops to jump through and you should be on a VPN as well.
Margin trading can offer you some great options for advanced users and even for hedging some of your trading as well. I don't recommend it for beginners, but you should at least be aware of your options and what a margin trade is for the future.
If you are looking for more great cryptocurrency resources, check out my dedicated Crypto Resources page where I list out all the tools & websites that I use daily. I couldn't live without most of these resources and I keep it updated regularly so you have the BEST tools to help you achieve financial freedom!
Hopefully this list has helped you to find the very best crypto exchanges to margin trade on. Until next time…