10 Major Margin Crypto Trading Terms You Should Know About

Margin crypto trading

Inexperienced crypto traders need to know about major concepts such as margin crypto trading as it can give them a better outlook on what the crypto space has to offer.

Margin trading is also known as leverage trading and is an advanced trading strategy that is supported by several cryptocurrency exchanges. The basic idea of this trading strategy is that as a trader you can borrow funds from the brokers and open bigger trading positions. Even though bigger trading positions mean possibility of higher profits, the profits are never guaranteed.

Instead, it is important for traders to keep in mind that bigger leverage means bigger risks. This is because a trade can go either way, which can result in high losses or high profits.

Therefore, every crypto trader needs to be properly familiar with the concept before they begin. Part of learning about margin crypto trading for beginners also includes knowing the major terminologies that are used and mentioned below.

Margin Crypto Trading Terminologies ā€“ The Long Positions

As you learn about margin trading, you will know that there are two types of trading positions while trading with leverage. One of the trading positions is the long position.

This is like betting in favor of the crypto asset. People who open long positions are positive that the price of an asset will increase in the future. This allows them to benefit from when the price eventually does surge.

For instance, if you opt for 20x leverage for BTC and it sees a 5% increase in its price, you can get 100% profits.

The Short Positions

The second type of trading positions you can open while margin crypto trading are short positions. These positions are like betting against a cryptocurrency.

In other words, short positions are opened by traders who are not optimistic about the future price surge of an asset and instead expect it to fall. This allows them to get some profits if the price of the asset falls.

For example, if you opt for 20x leverage for BTC and open a short position, you will get profits double your investment if its price falls 5%.

Leverage

Leverage is the amount that traders borrow from the brokers. This is why, it is also called leverage trading or referred to as trading with leverage.

The leverage offered by each exchange is different. In the crypto industry the leverage available for you can be as high as 101x or as low as 2x. Therefore, a tip for margin crypto trading for beginners is that they should consider the leverage offered by an exchange before they opt for one.

Margin

This term is a part of ā€˜margin crypto tradingā€™, but what does it actually mean? Margin is the total amount a trader has in their account or have to put up because the amount of leverage they can get depends on it. The more margin you add, the more leverage you can borrow.

Collateral

The total margin amount that a trader specifies for one or multiple trading positions is called collateral. To put it simply, it is a guarantee that the traders will be able to pay off any debt in case the trade goes south.

Margin Call

Margin call is a term which means the exchange requires the traders to add more margin. If the traders are unable to do so, the exchange can close their position at any time and cover the financial difference.

Liquidation Price

If you want to learn about margin crypto trading then you should also know what liquidation price is. This is calculated by the exchange you are using and by keeping your margin and leverage in perspective.

In case of long positions, you can lose all your funds if the price of an asset drops to the liquidation price. Similarly, if you opt for short positions and the price of an asset rises to the liquidation price you can lose all your funds.

Also Read This: Top Health Advantages Of Pomegranate

Stop-loss Order

The stop-loss order is a function that is important to know about when learning about margin crypto trading for beginners. This function basically ensures that the traders do not go through losses more than they can afford. You can set a percentage and if the price of the asset falls below that percentage, your stop-loss order can help you automatically close your trades.

Stop-limit Order

This function in margin crypto trading lets your open a trading position when the price of the asset rises above or falls below a certain value. You can set a time for it, which means you will be able to open a trading position at the right time.

Take-profit (TP)

This is somewhat similar to stop-loss order and is triggered when the price of an asset reaches a point that you were aiming for. Once you open a position, you will be required to set the TP manually.

 

Leave a Reply

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