If you are new to Bitcoin trade or electronic currency, you will be able to hear the seniors talk about Margin, then burn accounts, then pump armor etc. In this article we will introduce you to all the information about Margin Trading Bitcoin (and other currencies).
Introduction to Margin Trading
It means margin trading. KriptoA please go straight to the problem so you understand in the simplest and most intuitive way. Bitcoin price today is $ 2500, you predict it to $ 3000 and decided to buy. It is trading only with a profit of $ 500. So how to optimize this profit, still with $ 2500, the Margin trading floor allows you to use more money than your capital to buy. Particularly two trading floors popular with the Vietnamese is Poloniex provides a 2.5 times rate. That means you are allowed to use up to $ 6250 for trading, when the price is from $ 2500 to $ 3000. The maximum amount you will earn is: $ 1250 (Invested by $ 6250 instead of $ 2500). Bitfinex offers a rate of up to 3.3, which means you can use up to $ 8250, which means your profit can be as high as $ 1650. So with the same amount of capital, the same margin, the use of Margin will make you much more profitable (up to 2.5 times on the Poloniex, 3.3 times on the Bitfinex). In contrast, do not forget, when the price drops $ 500, you also hole more than 2.5 times and 3.3 times offline. You do not have to trade the maximum amount (2.5x / 3.3x), you can trade at any ratio: 1.2x, 1.5x, 2x. etc. You pay a small fee per day for this loan offline.
Since your actual fund size is only $ 2500, you are only allowed to lose a certain amount of money, and of course it is <$ 2500. The remaining amount is calculated as follows:
(Original amount – your losses) must be greater than 20% of the amount you play. In the example above, if you run out of $ 6250, your maximum allowable losses are:
2500- (20% * 6250) = $ 1250. If you play only $ 5000, your maximum losses will be $ 2500 – (20% * 5000) = $ 1500 – 20% bitfinex is replaced by 15%, meaning you are allowed more losses. As you can see, the more you play the limit, the more you lose money, which means that only small price fluctuations can cause liquidation of your account. Liquidation of the account is when the amount of losses exceeds the allowable loss (ie, the remaining amount: capital – losses are less than the limit of 20% of the amount you play). Clearing accounts is the trading platform that will close your buy / sell order, and return you the remaining balance: (capital – loss), this is the account burning.
In order to limit your account, Trader has a term called “armor”, ie adding money to your margin account, whereby the amount of losses allowed will increase, specifically:
– Losses allowed = Capital – (Amount x 20%), The amount of play remains unchanged, the increased capital leads to the increase in losses.
– Partial loss: Amount of loss allowed = Capital – (Amount x 20%), reduce the amount of play down, allowable losses also increased despite the constant capital.
Why are players pumping their armor or cutting a loss ? For example, they bought a bitcoin for $ 2500, now the price is down to $ 2100, the account warning a loss is about to liquidate (When not liquidated account or close position – You lose money, players believe the price is temporary, the price will rise again, then they increase the number of holes allowed through the two methods, to wait for the price up again. Situation after being liquidated account, the price up again you do not keep to profit anymore. Of course, experienced investors will know when to pump more armor waiting, when to close the order, accept the complete stop loss before more losses.
The basic conclusion: Margin Trading Bitcoin or electronic money, is the use of financial leverage to help you trade / trade in larger amounts to optimize returns, of course, with the risk of billion.
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