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Mary Ann Callahan
Mary Ann Callahan

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How to pick an exchange that will guarantee you profitable margin trading?

Bitcoin trading may not be a very old discipline, but it has definitely grown into a full-scale occupation, with people literally quitting their jobs in order to become crypto traders.


There are many trading strategies and options, as crypto exchanges differ in their features and listed coins. One of the popular techniques is called margin trading, and it can be very useful if you pull it off correctly. In order to do that, the crypto of your choice needs to offer an option to margin-trade.


To pick an exchange that meets your needs and start margin trading, you should, at first, get familiar with that concept. Therefore, let’s check out what margin trading is, and then we will discuss how to choose an exchange that will help you make the most out of this strategy.

What exactly is margin trading?

The very definition of margin trading is rather easy, it’s using third party’s funds in order to invest in trading. In the case of crypto trading, this third party is usually the exchange itself. Simply put, the exchange will offer you a sort of “loan” which you can use to invest in cryptocurrencies.


Therefore, if you trade in a basic way, it means that you only use the money that you previously deposited to a crypto exchange in order to buy and sell cryptos.


How exactly margin trading works in an example? Well, it’s rather simple. You margin-trade on the assumption that the price of a certain target cryptocurrency you want to buy is going to increase.


Let’s say that the price of a single unit of Ethereum is $100 (eth price is a bit higher than that right now, but we’ll assume this to simplify the example) and your budget is $500. With this amount, you can buy five Ethereums. If the price of a single ETH goes up to, say $105, you will make a profit of $25. However, if you invest a lot more money (and hopefully, ETH price goes further up), you can earn much more by trading.


The concept of “leverage” is important when using margin trading. In other words, if you leverage with 2:1, then it means you will pay half and the exchange will account for the other half of your investment.


If you want to find out more about the way margin trading works, there’s a great article on CEX.IO that sums it up pretty nicely. CEX.IO is a popular online cryptocurrency exchange that offers various trading pairs, low fees, and great overall service. Those interested in margin trading will have an opportunity to try it on this platform which is more than suitable for newcomers of the crypto world.


Let’s check out what you need to look for when it comes to margin trading in order to pick the best exchange for it.

What to look for when choosing an exchange for margin trading?

First of all, you need to know whether you need to open an additional account. This is not a bad thing, but it’s just extra steps before actually starting this type of activity. Many exchanges require opening a special margin trading account, while a couple of them allow you to use the same account as before.


Next, you need to find out how much you can leverage. Once again, there’s no bad answer here, but you need to know what your personal preferences are. Some exchanges offer only 2:1, while others offer 3:1. It all depends on your margin trading strategy.


Some exchanges offer both long and short positions. We will not explain these here, but there is a nice piece you should check out to find more about it. However, it’s best that you choose an exchange that allows you to do both types of trades. There will come a time when you’d want to shift from short to long and vice versa, and most likely you don’t want to change the platform you’re using in order to do that.


Customization plays a very important role in margin trading. Although the majority of popular online exchanges offer a wide variety of options related to this activity, some simply have more customization opportunities than others.


Finally, you need to pay attention to fees. It’s not rocket science — some exchanges are more expensive than others and your goal is to find the one that will be able to help you execute your margin trading strategy at a minimum possible price.

Bottom line: You’re on your own after that

If you’re looking for an exchange that will guarantee you profitable margin trading, you should give up. Although some exchanges can help you by offering additional options and a lot of trading pairs, none can actually guarantee that you’ll be a successful cryptocurrency trader and make a profit.


Once you understand how it works, and master how to set up orders, you’re good to go, but that’s only the beginning. The real adventure begins the moment you actually start trading. This is the time to learn various strategies and new techniques and stay updated about the latest changes in prices.


Even if you’re the best trader in the world, there’s no guarantee that you’ll make a profit every time you trade. Crypto trading is a risk and the cryptocurrencies are unstable. Therefore, your job is to minimize the element of luck by doing everything right, and the first step toward that is choosing the best cryptocurrency exchange for your margin trading journey.


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