Margin trading. Leverage (credit leverage)

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Margin trading allows participants to increase significantly their earnings. The principle of margin trading is to make transactions not only on your own capital, but also on borrowed (leverage).
The interest rates on such loans are quite high, therefore margin trading is considered to be very profitable, but also risky: you can either multiply your savings in a matter of minutes or lose everything overnight. This must be well understood.

It is worthwhile to warn beginners right away if you just learned about trading yesterday, we recommend switching to the materiel and the basics of regular trading, and then returning to margin trading.

In simple words — imagine that there are people with large capitals (in our case, cryptocurrency), they are given the opportunity to earn by lending their assets at interest. On Bitmex, margin trading implies the possibility of earning ordinary traders precisely at the expense of big players, increasing the maximum amount of the transaction that they could afford with the help of a leverage tool

Example

  • Price for 1 BTC = 8000 $
  • Trader in stock = 800 $
  • To buy 1 BTC on Bitmex, a trader needs to open a position on 8000 contracts with x10 leverage.

That is, we take money on bail from the exchange and buy 1 BTC. But the exchange must provide itself with a refund (like a pledge in a bank) — if you have not guessed the direction of the market, your entire deposit, or a part of it, may be liquidated.

There are two types of margin trading on Bitmex:

  • Cross Margin — By default, it is turned on as a checkmark in the leverage control panel. Cross is a translation of the cross, hence the cross trade means that between your positions will be automatically distributed ALL (!) Your balance. In this mode, the leverage size will be set depending on the size of the position.
  • Isolated trading — Automatically enable this mode when setting the leverage size. Here you limit strictly the transaction, allocating for each part of your money. At the same time risking only this amount, and not the entire balance on the account.

Different trading floors offer different sizes of leverage: 1: 1, 5: 1, 50: 1.75: 1. Bitmex offers a leverage of 100: 1, in the case of trading to Bitcoin or 20/50: 1 using other altcoins. This means that a trader can have a loan 100 (50/20) times in excess of his own capital.

Leverage trading will increase your earnings tenfold. But only if you are confident in your bet. If your forecast turns out to be erroneous, the position may be completely liquidated with a loss of funds (Margin Call).

Novice traders are strongly discouraged from using leverage greater than 5x.

Table of maximum leverage for Bitmex contracts