{"id":1284,"date":"2019-01-11T19:21:52","date_gmt":"2019-01-11T13:51:52","guid":{"rendered":"https:\/\/blockchainappfactory.com\/blog\/?p=1284"},"modified":"2022-03-11T13:26:21","modified_gmt":"2022-03-11T07:56:21","slug":"margin-trading-cryptocurrency-exchange","status":"publish","type":"post","link":"https:\/\/www.blockchainappfactory.com\/blog\/margin-trading-cryptocurrency-exchange\/","title":{"rendered":"cryptocurrency trading for beginners"},"content":{"rendered":"

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Increased usage and high reliability have resulted in cryptocurrencies becoming the preferred medium of exchange in an Internet age<\/strong>. It has resulted in several cryptocurrencies boasting of very high valuations. This also makes it a hot asset and from a trader\u2019s perspective, it becomes an exciting opportunity. Currently, cryptocurrencies can be traded quite similar to conventional forex trading and there are multiple platforms that facilitate such exchange. But, before we proceed to these platforms, let us understand the concepts of Future Trading and Margin Trading.<\/span><\/span><\/p>\n

It should be noted that Future Trading and Margin Trading are not exclusive to cryptocurrency<\/strong>. They are in fact borrowed from the traditional stock market and have universal applicability. In layman’s terms, Future Trading refers to an agreement to trade an asset at a pre-decided price. For example, you have ordered one tonne of aluminum for $2,000. In the days leading to the delivery, the price of aluminum jumps to $3,000 per tonne. However, the seller cannot change the price and incurs a loss of $1,000. This is because, at the time of placing the order, you and the seller agreed to transact at a pre-decided price for a fixed quantity of metal.<\/span><\/span><\/p>\n

Similarly, Margin Trading refers to the use of borrowed funds to purchase and sell assets<\/strong>. Returning to the aluminum example, imagine that this time around there is an increase in the metal\u2019s supply and the price drops to $1,000 per tonne. You want to take advantage of this price drop and plan to purchase 4 tonnes of the metal. However, you only have $2,000 and can purchase two tonnes. Hence, you have to borrow $2,000 from the bank to meet the deficit. This borrowed amount is called leverage. You are expected to return the leverage amount along with an interest to compensate the lender. By purchasing 4 tonnes of aluminum at $4,000 instead of $8,000, you have managed to make a profit by saving on the price drop! Thus, Margin Trading<\/strong><\/a> has a lot to do with the timing in order to reap the most benefits. Just like how you are liable to pay the bank back, Margin Traders are expected to pay back their investors irrespective of a profit or loss.<\/span><\/span><\/p>\n

Applying the same principles to cryptocurrency, Margin Trading is proving to be the most profitable form of crypto trading despite the risks involved. Here you engage in trade using borrowed money, also known as leverage in order to make potentially higher capital gains. At the end of the trade, the borrower has to return the money to the lender with an interest.<\/span><\/p>\n

Some reliable platforms that allow Future Trading and Margin Trading in cryptocurrencies are listed below.<\/strong><\/a><\/span><\/p>\n