What is Margin Trading?

Margin trading allows you to trade cryptocurrency with borrowed funds from an exchange. By putting up collateral (margin), you can control larger positions than your account balance would normally allow. This amplifies both potential profits and potential losses.

How Margin Trading Works

  1. Deposit collateral: Your initial margin
  2. Select leverage: 2x, 5x, 10x, etc.
  3. Open position: Control larger size
  4. Pay interest: On borrowed funds
  5. Close position: Return borrowed amount plus interest

Example

  • Your capital: $1,000
  • Leverage: 10x
  • Position size: $10,000
  • If price rises 10%: You gain $1,000 (100% return)
  • If price falls 10%: You lose $1,000 (100% loss)

Margin Types

Isolated Margin

  • Only allocated margin at risk
  • Position liquidated if margin depleted
  • Protects rest of account

Cross Margin

  • Entire account balance as collateral
  • Harder to get liquidated
  • Greater potential loss

Margin Trading Risks

  • Liquidation: Forced closure at significant loss
  • Amplified losses: Can exceed initial deposit
  • Interest costs: Accumulate over time
  • Emotional pressure: Higher stakes trading

Where to Margin Trade

Margin trading is available on exchanges like Binance, Bybit, and Kraken. Always start with low leverage and use stop-losses.