Since the first in three years Bitcoin bull run is here, we should refresh the list of the tools we are going to use to maximize the profit until the bears start kicking in. One of the methods to increase profits drastically is to use margin trading.
What Is Margin Trading?
Margin trading in the cryptocurrency trading sector is using the borrowed funds usually provided by the exchange for trading operations. Traders receive the stipulated amount of coins against collateral. As the trading profit depends on the price moves in percents, the profit in absolute figures will be the bigger the higher is the amount of the invested money. That's why margin trading can bring bigger wins. Needless to say that the risks in margin trading are higher because if you lose borrowed money you lose twice.
The logic is quite simple: for example, the trader enters the market with only let's say $50. Instead of investing this money straight in trading, he can use it as collateral to secure the loan provided by the exchange. If the trader chooses to start margin trading with 10:1 leverage (alternatively called "10x") he sets his share ($50) aside and the full sum of traded money grows to $500. It means that his profits can grow 10 times. After earning some profit the trader will pay the borrowed money and the interest rate back, some trading fees will be charged, the resting money will land in the trader's wallet. It will be much higher than the money he would make using only $50. The collateral is stored in a separate account called a "margin account".
To avoid losses, exchanges set the measures to save their money. If trading is not as efficient as it was planned, the trader can receive a margin call from the exchange — the requirement to add collateral in order to increase the chances to avoid losses. If it doesn't help, the price of the traded asset will eventually reach the "liquidation price" — the price at which the trader's position is liquidated by the exchange. This allows exchanges to protect the money they lend while the trader's collateral money may be lost.
The exchanges have different conditions on using the margin trade feature. The leverage rates can be different, the requirements on the minimum amount of investment can vary, etc. In recent years, the number of exchanges offering margin trading was growing slowly. Nowadays, several exchanges provide this functionality in their mobile apps. Below we are going to name the best examples.
HitBTC
A veteran in the cryptocurrency trading industry, the HitBTC exchange, provides one of the best margin trading options in its mobile app. The feature added to the exchange's main platform in the summer of 2020. The HitBTC mobile app is available both for Android and iOS. The maximum leverage is 12x (BTC/USDT and ETH/USDT pairs). The 10x leverage is available on over 10 markets: USDT can be traded against Bitcoin Cash, EOS, Tron, Litecoin, Ethereum Classic, Cardano, and Ripple. Bitcoin can be traded against Ethereum, Bitcoin Cash, EOS, Litecoin, Tron, Ethereum Classic, Cardano, and Ripple. x5 leverage is available for the following trading pairs: BSV/USDT, ZEC/USDT, DASH/USDT, XLM/USDT, BSV/BTC, ZEC/BTC, DASH/BTC, and XLM/BTC.
On HitBTC to start margin trading the user is required to verify an account and turn on a 2-factor authentication. The company wants to know whom it lends money to and make sure that this money will be stored safely. The accounts that didn't enable 2-factor authentication are much more prone to theft so both the company and the trader are interested in turning this protection measure on. As soon as 2fa is enabled and the verification process is complete, the user can start margin trading. To start that, the user should open the Margin tab, choose the currency, fill in the needed amount, and press the Amount button. When the funds arrive, the user can start margin trading.
We are pleased to introduce the margin trading tool finally implemented on our main platform.
— HitBTC (@hitbtc) July 6, 2020
Now, advanced users can trade up to x10 leverage with the capability of boosting their gains in a much shorter period of time. pic.twitter.com/1lF3ue9jNN
As HitBTC has good liquidity, the trading process is smooth. Trading amplified with the leverage can bring much profit. To secure yourself from losses, you may use stop-loss and limit-orders — thankfully HitBTC provides a rich choice of order types to make the trading process more flexible and avoid losses. It is especially important when trading in large amounts using borrowed money.
One more feature allowing traders on HitBTC to use leverage (up to 75x!) is perpetual futures trading. It utilizes isolated margins so traders can add or delete the assets for open positions. More than that, these positions have no expiration dates and can stay open for any amount of time. The supported assets for perpetual futures trading are BTC, ETH, TRX, BCH, ADA, DOT, SOL, EOS, AAVE, MATIC, XLM, UNI, LTC, and HIT.
What makes HitBTC especially good is that this exchange charges very low (the lowest?) trading fees. Trading in big amounts (which is quite realistic for margin traders) grants fee discounts or even bonuses instead of fees. That's how HitBTC is incentivizing users to increase liquidity. And it shows.
Prime XBT
Prime XBT was launched in early 2019. The platform allows trading FX, cryptocurrencies, stock indices, gas, gold, crude oil, etc. The exchange is not regulated and can be recommended only to highly professional traders. The reason is that the platform is designed exclusively for trading in large amounts. The minimum withdrawal threshold is set at $10,000 while leverage is at the 100x - 1000x interval which is also quite high. Such amounts create conditions where high wins go hand in hand with high risks. The traders without good trading skills and experience can lose much money on Prime XBT. The lack of regulation makes access to the platform easy (users don't have to provide anything except email address) however it also means that no authority will assist customers experiencing serious problems. However, for cryptocurrencies, the maximum leverage is set at 100x.
The liquidity is aggregated from over 10 large exchanges. The platform supports 5 cryptocurrencies: Bitcoin, Litecoin, EOS, Ethereum, and XRP. Deposits are available only in BTC. The minimum deposit is 0.001 BTC. Trading fees differ from 0.01% to 0.05% depending on the trading pair. As for withdrawals, the cost is 0.0005 BTC which is not too much if you compare it to withdrawal fees on other platforms.
#Traders can use multi-candle patterns to gain insight into where the market is trending, and there are a few key structures that all traders should know.
— PrimeXBT (@PrimeXBT) November 26, 2020
Trade patterns like Shooting Stars, Three White Soldiers, and Morning Star Dojis on https://t.co/2kPacA77rB today! pic.twitter.com/7afypgTIzw
The funds are stored in cold wallets. The servers of the company are DDoS-attack-resistant. The trading hardware is hosted on AWS servers which makes the trading process smooth and fast. The communication between the user and the exchange is secured with SSL encryption. The account access can be (and should be) protected with 2-factor authentication. Users can withdraw only to the whitelist addresses.
As for mobile app-exclusive features, the users can customize the interface, excluding the blocks of unnecessary information, shaping an individual trading dashboard. The basic Prime XBT features are presented in the mobile version. However, some claim that the app cannot fully replace the web version, and trading, especially when it comes to the Android version that is criticized for a slower speed. In general, Android and especially iOS versions are well-received by users.
BitMax
BitMax is a crypto exchange from Singapore. It was launched in 2018. There are concerns about the authenticity of the reported trading volume on the exchange, however, BitMax boasts competitive fees. On average, it's around 0.01%. The withdrawal fee is set at 0.0005 BTC which is below the market average a little. Trading fees on BitMax vary from 0.05% to 0.15%. The exchange is entry-level as it accepts credit cards for deposits. The number of supported coins is over 50. The exchange is following the KYC and AML standards and requires ID verification from users.
The platform provides around 40 margin trading pairs. The daily interest rate of BitMax leverage differs from pair to pair. The max leverage on BitMax is 10x which is relatively low.
The mobile app has some bugs which are usually fixed by new versions. Overall, BitMax app is considered to be quite convenient for margin trading.
Overbit
Overbit is a platform that brings together forex markets, metal markets, national fiat currencies, and crypto-assets. The company is registered in Seychelles. Despite having a wide functionality, the platform has an intuitive interface that won't confuse the novices. It provides instant swaps and a demo trading regime. On Overbit users can trade BTC, USDT, and non-cryptocurrency instruments.
As for margin trading, for cryptocurrency Overbit provides a 20x to 100x leverage. Stop and limit orders are supported. The exchange prevents users from getting negative balances through the insurance fund. The trading fee is zero. Trading activity is rewarded in so-called Tier Points that can be exchanged for USDT when the necessary amount is accumulated.
The Overbit mobile app has all the basic functions of the web-version including the margin trading feature. The mobile version is regarded as a handy application. The main cons of Overbit are the uncertainty about the exchange's liquidity and the limited set of supported cryptocurrencies.