What is Margin Trading? How does it works?

5 min readNov 21, 2021

What is Margin Trading?

Margin trading in crypto, in simple words, allows opening a trading position with leverage, by borrowing funds from the crypto exchange.

For example, if we opened a Bitcoin or any other crypto margin position with a 5X leverage and Bitcoin had increased by 10%, then our position would have yielded 50% because of the 5X leverage. With no leverage, it would have been only a 10% ROI.

Margin leverage can also be 25X and even higher, despite the risk, the same position as described above would have yielded 250% (instead of 10% with no leverage).

How does it works?

Margin refers to the amount of crypto an trader has in their trading account. “To margin” or “buying on margin” means to use money borrowed from a exchange to purchase crypto. You must have a active margin account to do so, rather than a standard account. A margin account is a leverage account in which the exchange lends the investor money to buy more crypto than what they could otherwise buy with the balance in their spot account.

Using margin to purchase crypto is effectively like using the current USDT or crypto already in your account as collateral for a loan. The collateralized loan comes with a periodic interest rate that must be paid. The trader is using borrowed money, or leverage, and therefore both the losses and gains will be magnified as a result. Margin investing can be advantageous in cases where the trader anticipates earning a higher rate of return on the investment than what he is paying in interest on the loan.

In most cases, the exchange provides loans to the traders so they can enlarge their capital to be used for margin trading. This way, traders can open positions with high leverage. The exchange doesn’t have many risks since every position has its liquidation price, which is based on the level of leverage.

MCS is one of the best margin trading exchange, the derivatives trading platform where traders ALWAYS come first.

Cryptocurrency market is in boom these days, those who invest in spot trading of crypto such as Bitcoin and other crypto are entering into bitcoin margin trading, which lets traders earn high returns with little capital. Today, we are talk about the benefits and risks of margin trading.

First of all, what are the advantages of margin trading on MCS?

Up to 100x leverage Available!

On the MCS cryptocurrency derivatives exchange, you can trade on margin using up to 100x leverage. The use of up to 100 times leverage means that you can manage up to 100 times the amount of assets you own. If you make an investment by depositing 100 USDT on the MCS cryptocurrency derivatives exchange, you can utilize an asset of 100 USDT * 100 times = 10000 USDT!

You can short sell on the price drop of Bitcoin!

In the traditional cryptocurrency spot exchanges, the concept of short selling does not exist at all, so the phrase “short sell on the price drop of Bitcoin” might sound a little off to some of you. In the stock market, short selling is an investment strategy in which if the price of a particular stock is expected to fall, you borrow stocks and place a sell order without holding actual stocks. Later when the price actually falls, you buy stocks at a low price, repay the borrowed amount, and take profit from the difference in return in the process. On the MCS cryptocurrency derivatives exchange, trading is conducted in contract units not spot, and if you want to short sell, you can enter a short position and make a counter order if the price decreases in the future to realize the profit from the difference

Like this adage, you should not be just reading this article, but got to try Bitcoin short selling on MCS with the $10 bonus given to new traders!

MCS Super Bonus program. It contains 3 levels and completing all levels give you the chance to win a total of 640 USDT and 15,500 MCS every month. Please note that all missions except the Welcome Bonus are based on the aggregated data starting from October 7th, 2021. please read the article below:

https://link.medium.com/otjyik1yelb

Margin Trading Tips: Read Before You Trade

Since margin trading is risky, hence, it’s not recommended for beginners in crypto trading, we had gathered some important trading tips:

Always start trading with small amounts: First time margin trading? then always start with small amount. Get the necessary confidence you need before jumping into the deep raging water of the leveraged trading.

Don’t go all-in at once: Unless you’re sure about your trading skills, it’s better to divide your position into portions, and create a ladder of prices. This way, you can reduce the risk while averaging down the entry price of the position. The same is true for taking profit. You can set-up a ladder of take-profit levels.

Understand fees and liquidations: Always know how much you are paying for fees and what type of fees you are paying. Trading on margin carries ongoing fees, make sure they don’t eat up your profit. The same is true for the liquidation price; you should know that number in case the position is reaching there.

Risk Management: When trading on margin, set clear rules of risk management, beware of excessive greed. Take into account the amount you are willing to risk, keeping in mind that it can be lost entirely. Set levels for closing positions, taking profit levels, and the most important always use stop-loss.

Short-term trading: Cryptocurrencies are considered to be very volatile assets. Margin trading of cryptocurrencies doubles the risk, and even more. Therefore, try to make short-term trading leveraged positions. Moreover, although the daily fees or margin position is negligible, in the long term, the fees can amount to a significant sum.

Extreme volatility : Crypto trading sometimes has extreme fluctuations that occur in both directions, creating candle wicks. The risk, in this case, is that the deep will touch our liquidation value. It could happen where the leverage is relatively high, so the liquidation value is relatively close.

information contained herein is not and should not be construed as an offer or recommendation to buy or sell any crypto. The information has been obtained from sources we believe to be reliable; however no guarantee is made or implied with respect to its accuracy or timeliness. The information and content are subject to change without notice. we do not provide investment advice. This material has been prepared for informational purposes only.

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