December 21, 2020
The Best Exchanges for Margin Trading in 2021
Margin trading is a type of asset trading using funds provided by a third party (exchange or broker). Traders borrow money from the crypto exchange using their own money as collateral. When the trade is over, the user brings the borrowed money back to the exchange. Standard transactions have a leverage of 1: 1. However, you can increase the size of your position up to 200 times (only on some exchanges).
It’s obvious that the more you invest, the more gains you may reach. That is why through margin trading you can quickly earn much, even if you have only $100 that you can afford to invest. But do not forget that reinforced transactions usually result in either higher profits or more significant losses.
There are many ways to earn via margin trading. Even in the bear market, traders can get profits through short positions. Of course, price movements create opportunities to earn profits out of buying and selling cryptocurrencies. But be sure that you understand the market behavior and use different types of orders which helps to secure the funds. Never forget that investing via margin trading is associated with risk. Before making decisions, be ready to do your own research on the market and the actions you are interested in.
If the market trend is opposite to your belief, you will receive a margin call from the exchange. It happens when the price hits a certain point where trading starts to be too risky to continue with the same collateral and leverage. A margin call is a helping hand from the exchange requiring to increase the collateral. If it is impossible the position gets liquidated. If the additional collateral doesn’t help, the position gets liquidated, also.
Profits and losses in margin trading are higher that’s why it’s important to use the exchange with high liquidity. Also, a great opportunity gives you Demo Mode, as you can get your experience on how to trade with the leverage and try margin trading without investing real money.
Now let’s have a look at some of the most convenient cryptocurrency exchanges that provide a margin trading option.
HitBTC
- In the industry since 2013 and never experienced security breaches.
- In terms of liquidity, HitBTC has a trading volume of roughly $900 million.
- HitBTC is one of the most diverse crypto trading platform. Exchange supports 414 crypto coins that build over 900 trading pairs. BTC/USDT and ETH/USDT can be traded with up to 12x leverage while 23 other pairs (based on USDT or BTC) are traded with 10x or 5x leverage. All of the supported coins are top coins traded in pairs with BTC or USDT.
- Platform has low fees. The maximum trading fee is set at the 0.09% mark while those who trade in large amounts can enjoy fee discounts.
- HitBTC has a clear P&L (profit and loss) or simply what you get when you close the position. On HitBTC’s platform this info can be easily monitored at any given moment.
- Easy and quick registration. To start trading users need to have a confirmed email address and enable 2-factor authentication.
- Exchange’s mobile application and DEMO MODE is available.
Binance
- Exchange founded in 2017.
- Nowadays, the exchange has the largest liquidity in the industry. The trading volume exceeds $6 billion while the rest exchanges can barely reach $2 billion in volume. So, in this case you can be sure that your order will never be stuck.
- Huge number of supported cryptocurrencies (although this number is much smaller than on HitBTC) — 260 currencies in 880+ trading pairs.
- Binance is a crypto-to-crypto platform, so you would need to buy crypto currency elsewhere or via the OTC trading desk on Binance.
- Platform is highly secured, anyway it was hacked in 2019 with 7,000 BTC stolen.
- As for December 2020, Binance provides an opportunity to borrow money in over 40 cryptocurrencies. The maximum leverage available on Binance is only 5x — not as much as on other trading platforms.
- Traders can borrow more money in one click switching a regular order mode to a margin order with borrowed money. When the trade is over, the leveraged funds should be repaid manually.
- Mobile app available for users.
- KYC and enable 2-factor authentication before opening a margin account is obligatory. After the trader has to move money to a margin wallet. These transfers between the user’s wallets are free of charge.
BitMEX
- Founded in 2014 although the exchange is not that popular among beginners in crypto trading. It is so, because Bitmex has a more complex structure than many modern exchanges, but it is considered to be secure and private.
- On BitMEX you can trade derivatives, futures and perpetual contracts. The platform is not for traders who have little funds.
- BitMEX is a p2p platform. The exchange supports over 10 currencies including USDT, Bitcoin, Ethereum, Litecoin, XRP, Cardano, EOS, Tron, Binance Coin, Bitcoin Cash, Ethereum Classic, Dash, Zcash, Monero, and so on. Bitcoin is a base currency on BitMEX.
- Fiat money can’t be withdrawn and deposited. BitMEX doesn’t charge fees for withdrawals and deposits. Maker trading fees are well below 0.1% while taker fees are quite high — 0.25% for all currencies, except Bitcoin. The BTC taker trading fee is only 0.07%. The exchange is considered to be secure and private.
- Huge leverage. For Bitcoin contracts, traders can have up to 100x leverage, Ethereum contracts – 50x leverage. The maximum leverage for Monero is 25x. So, you always need to check the conditions before opening positions.
- Traders must be able to cover the total margin maintenance amount because the leverage is provided by the other users of BitMEX (as it is P2P platform). That’s why the trader’s balance cannot fall below zero.
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