Margin Trading is an act of borrowing additional money or cryptocurrency by leveraging the number of cryptocurrencies that you already own to buy additional cryptocurrencies.
Let's assume you want to make an investment of $2000 in BTC but you only have $1000. So now to bring in the extra $1000, you borrow that through the margin of 2:1 (2x means, for every dollar you have, you will get one extra dollar to invest).
Now imagine the BTC price increases 50%, and so has your investment. So the $2000 you invested is now worth $3000. You can liquidate and pay back $1000 to the lender and enjoy your profits of $1000. (Assuming 1 BTC costs $2000)
But on the flip side, if the BTC price decreases by 50%, your investment of $2000 has also reduced to $1000. In this case, the lender needs to be protected and he/she has the first right to claim the remaining $1000, so this goes to the lender. Now, your initial investment of $1000 is also lost and now you are left with nothing.
So you see, margin trading can be very rewarding as well as highly risky and that's why it is not recommended to margin trade until unless you understand what the risks are.
But if you are a veteran trader, and know how charts work, you can give crypto margin trading a shot through the following exchanges:
Well, that's all for now in CoinSutra's Crypto Education Series.
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Bitcoin and Altcoins Margin Trading for Beginners 🥇