Margin Trading Crypto: Find out What It Is & How It Works

What Is Margin Trading Cryptocurrency?

In our latest Bitstacker.com guide, we look to decipher the myths behind margin trading. If you’ve ever wondered what is leverage in crypto trading? then we are confident this guide is for you.

As you read on, you’ll quickly establish a firm grasp on the idea of leverage, how it can be utilized, and what benefits it can add to those trading cryptos. We also take time to highlight how you can find yourself a top crypto trading platform, and much more.

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Who should make use of our latest comparison? – Those wanting the answers to what is leverage in crypto trading?

Our gurus know what it is like to step into the daunting world of online trading – let alone margin trading. So, you can rest assured that, regardless of your trading knowledge, you’ll soon have the answer to what is leverage in crypto trading? We’ve been working hard to piece together the below guide detailing the ins and outs of margin trading, offering up our expert insight in a concise and comprehensive, yet accessible way. By its close, we are confident that you’ll be fully aware of what leverage in crypto is and how to make use of it effectively.

Although many will often say that beginners should stay clear, we believe that if you find yourself the right platform and take on board a little expert guidance, there is no reason that you cannot begin your margin trading journey today.

Everything below is written in the hopes of benefitting the careers of all types of traders, building their knowledge, and finding the perfect platform for them to place all of their newfound knowledge to the test. If this sounds like something of interest, we suggest you continue.

What is leverage in crypto trading? – Crypto leverage trading explained

The easiest way to view leverage in crypto trading is as borrowed funds. When looking to trade crypto online, your initial deposit will be viewed as collateral and will help to determine the amount of leverage you can access.

Nowadays, it is not uncommon to see leverage ratios extend to the dizzying heights of 1:200; however, it is also not uncommon to see substantial fees associated with them. The leverage you acquire is used as a way to improve your overall buying and selling power, greatly increasing your potential profits (and losses).

With this in mind, it is important that any trader looking to take advantage of margin trading makes their way through the entirety of this margin trading guide for crypto users and makes use of stop-loss tools, finds a platform that offers negative balance protection, and focuses their trades based off of a tried and tested strategy. Although nothing is guaranteed in this new and volatile market, it certainly helps to have all of the right checks in place when playing with leveraged funds.

How does crypto leverage trading work? – Benefits of leverage trading

So, we already know that leverage allows traders to use a smaller amount of capital to access greater market positions, but what does that look like in practice?

If a trader was looking to deposit $1000 at a leverage ratio of 1:5, they would now have $5000 to make use of in the crypto realm. As you can see, this gives a trader a much greater starting base to begin their leverage crypto trading career; however, it does come at a cost.

As we’ve already mentioned, nothing is guaranteed when trading crypto and leveraged trades can go for or against the trader. A 1:5 leveraged trade moving in the right direction could create 5x the profit made without leverage (minus fees); however, if we have placed an unsuccessful trade, the same 5x will be applied to our losses (including fees).

That is, of course, without taking additional fees into consideration. At the time of writing, most leveraged crypto trading platforms will apply fees to numerous aspects of the trading cycle, including a fee attached to each buy/sell order, conversion, rollover and overnight fees, as well as an initial promised fee on returns.

Thankfully, those looking to trade crypto using leverage can utilize the stop-loss feature when placing their trades, set a notification to receive a margin call, and plenty more.

Things to consider before opening a trade

  • Making use of a strategy: A strategy is one of the key things that help to separate good traders from great traders. The implementation of a strategy allows traders to quickly pick up and eradicate issues, understand their profit/loss margin, and focus their efforts on specific markets, days, and instruments.
  • Using a smaller leverage: When you make your initial deposit, you will be granted a  maximum leverage value. If you make use of a smaller leverage, you will lessen the risk of receiving a notification about a margin call, should your trades go against you.
  • Diversifying your portfolio: With the ability to open numerous positions, comes the chance to diversify your portfolio. If all of your eggs are in one basket, it just takes one sudden market movement to see your collateral come crashing down.
  • Setting a stop-loss: As discussed above, the stop-loss is the single greatest tool to help eliminate the risk of a margin call. Keep in mind the volatility of the market and don’t risk more than you can afford.
  • Finding a platform that offers low fees: Take advantage of the bitstacker.com platform and find yourself a crypto trading platform that offers low fees for margin traders. The rewards will speak for themselves should you become successful as a crypto margin trader!

How to find the right trading platform for you – key attributes of the best crypto trading platforms today

Now that you’ve had crypto leverage trading explained, it’s time for our experts to focus their efforts on finding the perfect trading platform for you. As you would expect, there are countless facets of a trading platform that can help determine its ranking and overall rating. Below, you’ll receive an overview of the top five attributes that we believe to be of most importance when searching for the best crypto leverage trading platform around.

Top-tier security

Any time your finances are in question, security should be at the top of your concerns. This theory runs true into the world of crypto, too. For centralized crypto leverage trading platforms, you can expect the best to provide ample two-factor authentication options, as well as the latest encryption technology across the site. Although anonymity is the name of the game for decentralized leverage trading platforms, most will still provide great levels of security. Even though a KYC procedure may not be followed, traders can still rest assured that their on-site experience is kept as safe as possible by checking their capital base, whether firewalls are used, or if custodial storage services are provided.

Lower fees

Bitcoin and Ethereum leverage trading are becoming more and more popular as the days roll by; however, for many up-and-coming platforms, what is helping to set them apart is the niche cryptos that can also be leveraged against. While this is fantastic news for traders looking to diversify their portfolios, it is worth discussing the additional charges that may be involved. Based on our recent findings, traders can now expect to receive fees for depositing, withdrawing, converting, buying, selling, holding a position overnight, and more. With this in mind, it pays to check the fees associated with your crypto trading platform before signing up and making any deposit.

Various cryptocurrencies

It may seem as though we are contradicting ourselves a little here, but please let us explain. While you can expect to find additional fees associated with your leveraged positions on niche cryptocurrencies, that should not be enough to put you off entirely. Naturally, we would propose finding a platform that offers reduced fees. However, if you believe that the whitepaper and roadmap are strong enough to take your chosen crypto to the moon, then paying a little extra to a particular crypto leverage trading platform is not the end of the world. The rate at which digital currency is spreading should also be an indicator that when searching for a platform, you should be thinking “the more the merrier“.

Ample charting tools

You can see how this puzzle slowly starts to fit together in this next section. You can have all the cryptocurrencies in the world; however, if you don’t have sufficient tools to test your strategy and plot your points, then you’re going to find it very difficult to find your entry and exit point. When margin trading is involved, that is a very risky business. For this reason alone, we focus our efforts on finding margin trading platforms that provide a solid collection of charting tools. If you want to see a good example of this, then check out our latest Bybit review.

Great usability

Finally, it really does help to find yourself a bitcoin leverage trading platform that is simple and straightforward to use. The main reason behind this is plain to see – it limits the risk of missing out on a trade. When your own money is involved, it makes sense to find a platform that allows you to move it around freely, safely, and efficiently. Not only this, but for those who trade professionally, it helps to find yourself a margin trading platform that is accessible via mobile phone. Caught in a meeting? Sat in the cab? En route to dinner? No problem!

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Storing your crypto: Hot or cold?

When it comes to moving your crypto assets, it pays to have a wallet that fits the bill. For those of you who are looking to make the most of market movement and trading crypto with leverage, a hot or online wallet may be the best choice. For those of you who are looking to transfer your profits out after a successful stint of margin trading, we are confident that a cold wallet is of most use to you. If you are unsure of any of the terms used above, you’ll be pleased to hear that this next section of our what is leverage in crypto trading guide, focuses on the different kinds of wallets available to you.

Hot: A hot wallet is often referred to as an online wallet, due to it becoming accessible as soon as your laptop or mobile phone is connected to the internet. As you would expect, this type of wallet is ideal for those looking to transfer their assets quickly from their own account onto a margin crypto trading platform. The reverse process is also seamless, provided you’ve entered the correct recipient wallet address!

Cold: A cold wallet is stored offline and resembles a USB. The portable device can be plugged into your laptop/desktop and you can link your wallet and send funds freely once connected. It is by far the safest method to use; however, the downfall is quickly highlighted by those who are looking to capitalize on sudden market movements. In our humble opinion, the cold wallet is far better suited to investors or those who plan to keep positions open for a longer duration.

Alternatively… traders can also look to keep their crypto stored with their chosen leverage crypto trading platform, although the aforementioned wallet types are the main ones used across the crypto sphere. Storing funds on-site is ideal for those looking for ease of market entry and is essential when using your deposit as collateral; however, once your trading day has been completed, we would recommend moving it to a safer venue.

Conclusion – what is margin in crypto trading?

To summarize, crypto margin trading gifts traders with the chance to unlock a greater bankroll, provided they have sufficient collateral to put down in the beginning. The size of this initial deposit will contribute towards the leverage offered, although this multiplier will vary from platform to platform.

Due to the volatility of crypto trading, leverage has proven to be a popular choice for many. As we should already know by now, margin allows traders to execute larger trades, creating greater potential; however, it is also important to note that the reverse effect can be had. This is why it is incredibly important to make use of additional resources supplied by your chosen platform, including stop-losses and margin calls, as well as taking full advantage of the bitstacker.com site. Here, our experts work non-stop to create educational and interesting guides, reviews, and articles on all things to do with trading online. If you feel that margin trading on crypto is the right approach for you, make sure you check out our latest crypto trading platform comparisons in order to find the perfect spot for you.

How does leverage crypto trading work FAQs

🚀What is leverage in crypto trading?

If you are hoping to find the best highest leverage crypto trading platforms, then you’ve come to the right spot. Here at bitstacker.com, we’ve tasked our experts with taking a collection of the best trading platforms today and compiling honest, authentic, and comprehensive reviews of what they have to offer. You’ll soon find out about the security features, fees, available cryptos, and more.

💯 Who is the best crypto leverage trading platform?

In our latest Prime XBT review, we discuss the ins and outs of the popular crypto platform. For many, Prime XBT ticks all of the essential boxes; however, it is important to remember that finding the perfect trading platform for you is imperative for your success. With this in mind, we suggest checking out the bitstacker.com reviews and comparisons to find out about the competition.  

🔓︎Is crypto leverage trading safe?

For any of our readers looking to open up an Islamic trading account, it may be worth considering is crypto leverage trading halal? Before focusing on the safety of your desired platform. Once you have confirmed the answer to both questions, make sure you stick around with bitstacker.com. Our platform is dedicated to helping traders from all backgrounds develop their knowledge and improve their overall trading experience. 

📱Can I make use of leverage trading in-app?

Due to the demands of crypto trading, and its extreme volatility, the need for mobile trading has become evident. Recently, many top margin trading platforms have created dedicated apps to deal with the pressures that trading crypto on leverage brings. Fancy beginning your search with a reputable and credible provider? Then we suggest reading our Phemex review

💲How does crypto leverage trading work ?

If you are new to the trading world, then there will be many questions that you will be hoping to find the answers to. Thankfully, you’ve already found us at bitstacker.com and we’d love to be a part of your journey. Across our dedicated platform, you’ll find all sorts of content devoted to traders, including reviews, comparisons, expert guides, and more. 

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