Cryptocurrency Margin Exchanges. Bitcoins and altcoins - margin trading for beginners
How to make money on the cryptocurrency market with a small deposit? The answer is simple - use cryptocurrencies with leverage and multiply the profit by 5 !!
In this article, we will talk about what marginal trading in cryptocurrency is, we will analyze all its pros and cons, and also get acquainted with exchanges and brokers where you can trade cryptocurrencies with leverage.
What is margin trading and cryptocurrencies with leverage
Leverage is the borrowed funds that exchanges and brokers provide to their clients for transactions in the financial market. In simple words, they add their own capital to traders ’transactions, thanks to which the latter get the opportunity to significantly increase the volume of their trading operations and, accordingly, the amount of profit.
The need to use leverage is usually associated with the fact that many traders come to the financial market with small deposits, which are not quite enough to enter into transactions and receive the expected percentage of income.
Margin trading tools have long and successfully been practiced in the stock, commodity and foreign exchange markets. And more recently, cryptocurrencies with leverage have begun to appear, which significantly expands the opportunities for trading in the digital money market. Indeed, leverage gives traders the opportunity to use in trading significantly more funds than they actually have!
Leverage cryptocurrency trading example
In order to correctly understand how this works, we give examples of cryptocurrency trading with and without leverage.
So, imagine that you have a deposit size of $ 200 and decided to buy Ripple digital coins for the full amount of funds. The current market price for 1 Ripple coin is $ 0.181369.
If you trade without leverage - then, using your $ 200, you could buy 1102 Ripple coins.
Now, imagine that the price of Ripple rose to $ 0.28,000 per coin. Selling your 1102 Ripple coins back at the current price, you will receive $ 308.56 for them (of which $ 200 is the size of the initial investment, and $ 108.56 is your profit).
If you use leverage (1: 5) - then the size of your transaction will no longer be $ 200, but $ 1000, since a leverage of 1: 5 implies multiplying the volume of a trade by 5. In this case, you will not buy 1102 Ripple coins, but immediately 5510 coins !!
Next - imagine that the price of Ripple rose to $ 0.28,000 for 1 coin. Selling your 5,510 Ripple coins back at the current price, you will receive $ 1,542.8 (of which $ 542.8 will be your profit, $ 200 will be your initial investment and $ 800 will be loan funds, which, after closing the transaction, is your broker or the exchange will take it back).
That is, trading with cryptocurrency with leverage, you will receive $ 542 profit, and without leverage 108.56 $. The benefits are obvious!
As you can see, cryptocurrency margin trading can significantly increase the amount of your profit. However, there are also disadvantages: when using a leverage of 1: 5, not only the size of the profit is multiplied by 5 times, but also the size of the possible loss!
Thus, you should understand that cryptocurrency trading with leverage has its pros and cons! On the one hand, it is several times more profitable, since it allows you to trade much larger volumes, which means you can get much more profit. On the other hand, it is much more dangerous, since the size of the potential loss is many times larger.
As a rule, cryptocurrency margin trading tools are used by traders who speculate on short-term changes in the price of coins. This allows to use the advantages of margin trading to a greater extent, that is, to increase the trading volume of the transaction with a significantly lower risk of loss of funds.
IMPORTANT TO KNOW about margin trading in cryptocurrencies
Cryptocurrency margin trading is a financial lever that is suitable exclusively for trading, that is, for short-term speculation on minor changes in the price of cryptocurrencies. If you are an investor who wants to buy cryptocurrencies for long-term storage, then the margin trading lever will not suit you!
The thing is that coins purchased using leverage cannot be withdrawn from a traditional digital money exchange to a wallet. They will be held by the exchange as a margin for trading operations. In the end, you can only use the profit that you will receive after selling the cryptocurrency coins that have grown in price with a leverage in the market.
Where is it better to trade cryptocurrencies with leverage?
As we noted above, the mechanism for using leverage for cryptocurrencies turns them from an investment tool into a pure-looking trading tool. And given the significant shortcomings of traditional exchanges in terms of trading, we do not recommend margin trading in cryptocurrencies on the platforms of ordinary digital coin exchanges.
Forex brokers are much better suited for cryptocurrency trading with leverage. And that's why:
1. A traditional exchange provides primitive functionality for margin trading, which is inconvenient for transactions and money management, while forex brokers for leveraging cryptocurrencies offer a technically advanced Meta Trader 4 terminal (where, in addition to the convenience of manual trading, you can use trading robots for automatic trading).
2. Forex brokers provide a rather interesting set of cryptocurrencies with leverage. For example, on the basis of a broker, you can trade cryptocurrencies such as: Ripple, Ethereum, Dash, Litecoin, Bitcoin. And these are the main of the popular coins of the digital money market.
3. Forex brokers have much better liquidity! If a traditional cryptocurrency exchange works only with its own liquidity and quotes, then forex brokers use quotes and liquidity from several exchanges at once. For example, the FXPRIMUS broker works with liquidity and quotes of several major exchanges at once, such as Poloniex, Coinbase, Bitstamp and KRAKEN. Thus, on the broker's site, you can buy and sell cryptocurrencies at a much better price than on the basis of any traditional cryptocurrency exchange.
4. The forex broker uses a single deposit currency (for example, USD or EUR), in which trading is carried out and profit is recorded on the trader’s transactions. That is, you do not need to convert the currency when withdrawing profit by paying extra fees.
5. Depositing and withdrawing funds on the site of a traditional exchange is quite expensive, which costs around 1.5% -6% of the transaction size. At the same time, for example, a forex broker has a commission for depositing and withdrawing funds of 0%.
Thus, if you are a trader and are looking for the best platform for trading cryptocurrencies with leverage, then the best option is a forex broker platform.
Conclusions on Margin Trading in Cryptocurrencies
Margin trading in cryptocurrencies is a really working financial leverage, if used correctly, you can significantly increase your trading potential and opportunities. Like it or not - a leverage of 1: 5 allows you to increase the profitability of cryptocurrency trading 5 times !!! And this is a significant enough risk premium!
For traders with a limited number of crypto resources, that is, bitcoins and altcoins, there is the possibility of margin trading. This method allows you to increase the amount invested in assets without actually owning them.
It is important to note that marginal trading is not recommended for everyone, since such investments are at great risk.
So here we go: what is margin trading?
Margin trading allows a trader to make investments using borrowed funds. For example, we opened a margin position with 2X leverage. Our underlying assets grew by 10%. It turns out that the position gave 20% due to double leverage. Standard transactions are made using leverage of 1: 1.
Margin trading is possible thanks to the credit market. Lenders provide loans to traders so that they can invest in more currencies, and lenders benefit from interest on loans.
On some exchanges, such as Poloniex, users provide loans for margin markets, while on others they exchange directly. At Poloniex, anyone can lend their bitcoins or altcoins and benefit from interest on the loan.
The main drawback of such services is that coins should be in wallets on exchangers, which is less secure than storage in a cold wallet.
Costs and risks of margin trading
As mentioned above, the value of the margin position includes the payment of interest on loans (exchangers or other users) and the commission for opening a position on the exchange.
As the chances of earning increase, so do the risks. The maximum that you can lose is the amount you invested in opening a position. This level is called resale value.
Salvage value is the value at which the exchange automatically closes the position so that you do not lose any of the borrowed coins - only your own money.
Example: if we are talking about classical trading with a 1: 1 leverage, then the liquidation level will be reached when the position is equal to zero. As leverage increases, the value of liquidity will approach our purchase price.
For example, the value of bitcoin is $ 1,000, we bought one bitcoin (long) with a leverage of 2: 1. The value of our position is 1000 US dollars, in addition, we took another 1000 US dollars. The residual value of our position will be just over $ 500, because at this level we lose our initial $ 1,000 plus interest and fees.
Margin trading is possible against the market, we can also use short positions with leverage.
Manage risks - with margin trading, it is important that you have clear rules for managing risk. Beware of excessive greed. Calculate the amount you are willing to risk.
Remember that you can lose all the money invested. Set clear levels for closing positions, making a profit or stop loss.
Watch carefully - cryptocurrencies are considered assets with high volatility. And margin trading doubles the risk. Therefore, try to open short-term trading positions with leverage.
Keep in mind that daily commissions or margin positions are negligible, but in the long run, these fees are a decent amount.
Extreme movements. Cryptocurrency trading is associated with extreme fluctuations occurring in both directions (“Depths”).
The risk is that depth may affect our resale value. This is especially dangerous for traders with a large leverage and with a low level of their own investments.
But you can take advantage of these depths and try to set a limit for closing a position - perhaps the depth will go the other way and you will get a good profit.
Margin Trading Exchanges
Margin trading is now possible on almost all exchangers. Its advantages are obvious, but it is important for each user to be confident in the safety of their finances. Traders seek to minimize the number of coins located on exchanges.
Exchangers are considered ideal targets for hackers, in recent years there have been several major hacks, and the last significant victim was Bitfinix (in 2016). Then the attackers stole a third of the exchange's bitcoins.
Margin trading allows you to open increased positions without having to buy bitcoins, so we can store fewer coins on the exchange.
For example, if our portfolio consists of five bitcoins, and we want to hedge the risks of a depreciation, you can open a 10X leverage position - it will be equivalent to 40% of our portfolio.
To open a position, only a tenth of it is required (10-fold leverage). It turns out that we need only 0.2 bitcoin. And the rest of the money is stored in reliable cold wallets.
Bitmex - Bitmex in a short time gained a reputation as one of the best exchanges, most traders (including us) trade on it. The exchange supports the possibility of margin trading with 100X leverage; you can choose both long and short.
The service is very easy to use, it has good support. Follow this link and get a 10% discount on the first six months of work.
Plus500 - the world famous Forex trading company. The site supports the use of bitcoin and all major altcoins for margin trading (Ethereum, Ripple, Litecoin, Bitcoin Cash and others).
The main advantage of the exchange is that this service is fully regulated by the company, there is 24/7 support and obligations to millions of customers.
Now you can’t invest bitcoins, but after registration you will get the opportunity to immediately start margin trading with a deposit or bank transfer.
Margin leverage can be set up to 1:20, the exchange facilitates smooth entry into trading thanks to a free demo account. To get started with Plus500, you can explore video guides.
Bitfinex coordinates the largest Bitcoin-dollar trade flow, while the margin can reach leverage with a level of 3.3X. The site has a very convenient interface, all actions are performed intuitively.
Poloniex - The largest cryptocurrency exchange. There is support for eleven altcoins, but there is no possibility of margin trading BTC-USD. Leverage is available only up to level 2.5X. Relatively high interest rates when shorting.
AVAtrade - Another world-famous CFD-exchanger that allows you to trade on Bitcoin CFDs, as well as other cryptocurrencies. The company is fully regulated, as on Plus500 there is a free demo account. Link to the official website:
Today we’ll talk about the topic of margin trading, about the pros and cons.
Margin trading is trading during the day / week / month / year. That is, during any time period. The crypto trading market is quite young, but some exchanges (GDAX, Bitstamp, CEX.io, Bitfinex, Bitmex) actively offer market participants such a tool for trading.
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Bitmex Margin Trading
The first of the benefits of margin trading is the ability to hedge your funds in case the market falls. This is the so-called opportunity to short.
Consider the chart of one of the exchanges (Bitmex).
Go to the exchange, you see a window in front of you:
Bitmex how to short cryptocurrency
Choose the number of contracts and price (in detail Bitmex is described in one of our articles).
Bitmex exchange overview, how to fund your account and trade with leverage
Press the button - to sell (this is the short). Circled in a green circle. After that you will see the following window (order confirmation):
Bitmex, short position with shoulder 100x
Click Sell, and the order is placed according to the specified parameters.
Bitmex short position
When the price reaches your order, the exchange will execute it and you will have a position sold according to the conditions of the order.
LocalBitcoins exchange, how to buy and sell bitcoins without fees
To close this position - to get profit, you need to perform the reverse operation - to buy. For example, the price reached the level of $ 17,420 (open the short), then fell to the level of $ 16,500 (buy / long). Enter the mirror number of contracts (if you sold 100, then buy 100; if you sold 1000, then buy 1000) and the current price at which you want to close the order.
Bitmex closing short position
Click buy according to the specified parameters, and the system closes your position.
Bitmex, margin trading calculator
Your margin is easily counted on a calculator. Click on the icon (circled in green) and the calculator window pops up.
In the calculator you can evaluate how much contract volume you can buy / sell and what margin is possible as a result of your trading.
Bitmex margin is accrued in BTC, designation XBT. That is, when earning 0,0003 XBT, your margin is 0,0003 BTC. If you bid 10,000 contracts, your potential margin may be 0.0320 BTC. With 100,000 contracts - 0.320 military-technical cooperation, etc.
Potential and risks of Bitcoin ETF
An important point. On the Bitmex exchange, it is possible to use a very large leverage - 100x. Leverage is an opportunity to take many times more contracts than your deposit allows without leverage. The 100x shoulder is a very effective and risky tool!
Bitmex, leverage 100x
It is risky due to the fact that at the time of use of leverage, the exchange indicates the liquidation price, which is usually very close to the order opening price.
For example, with 1,000 contracts and a price of $ 17,420, the liquidation price with a leverage of 100x will be $ 17,503.5. The amount of the contract will be 0.0006 MTC, and the loss - 0.0574 (column - the amount of the order).
Contract amount - 0.0006 BTC - this is part of the deposit, which is withdrawn from you immediately upon execution of the contract. She returns if you close the position with a profit. If the liquidation price is reached, then no. To minimize losses, always place stop orders.
Market Stop Tab. You choose the same number of contracts of 1,000 and the price of $ 17,430 (that is, above $ 17,420). If you were selling, that is, shorting, then put the stop in the opposite direction - to buy. If you bought, then stop also in the opposite direction - Stop sell.
And confirm:
Bitmex, market stop
Thus, you will minimize your risks of trading with a large leverage.
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A big plus of leverage is the opportunity to earn more with a small deposit. For beginners, I do not advise using a leverage of more than 3-5x. The liquidation price will be much lower than the entry price, but it is better to get your hand on small volumes and risk levels.
One of the drawbacks of the Bitmex exchange is if you do not want to shorten, and the market is in correction and you want to sit out the drawdown in fiat, unfortunately, there is no such function on the exchange. Then you need to use: Bitfinex, GDAX, CEX.io or Bitstamp. At these exchanges, you can sell the cue ball without going into margin trading.
Bitfinex Margin Trading
Let's look at the functionality of another exchange. For example, you want to shorten 1 MTC for the price of 13697 on Bitfinex. Choose margin trading (Margin tab, not Exchange!). Set the data and click Margin Sell (the green circle is circled around the price).
Bitfinex how to short
Accordingly, the reverse operation is to buy Margin Buy. For example, at $ 13,200.
Bitfinex how to close short
As a result, your earnings will be: $ 13,697 - $ 13,200. That is $ 497 on one MTC. If your balance allows you to take, say, 10 military-technical cooperation, then $ 4 970 you will earn on the fall of the market.
An important point. The Bitfinex exchange enables leverage up to 3.3x. Moreover, if you use leverage, the system immediately blocks 15% of the order amount for your current order. The exchange considers the liquidation price based on its data and automatically displays it when placing an order.
Top 3 cryptocurrencies to invest in 2018, except for Bitcoin from Montley Fool
Stop orders
I highly recommend placing stop orders on the Bitfinex exchange, since the exchange has high liquidity and is often seen in price manipulations and sharp price breakouts. So that your order does not endure with one candle due to a trading failure of some bot or panic sales / euphoric purchases.
What happened to Coinmarketcap prices? How not to succumb to panic sales ?!
CCA order
Practical enough for placing stops is the type of CCA order.
For example, you have opened a position on bitcoin in the amount of 1 BTC. Short position - sale. Entrance price $ 13,697. That is, they made Margin Sell, as in the first example.
Next, go to the CCA order. In the order window, set the following values: PRICE USD - $ 13,200 (this is the exit price, that is your take profit!), OCO STOP USD - $ 13,700 (this is the price of your stop order). An OSO order allows you to automatically place an order to close a position and a stop order in one window. After entering the necessary data, click Margin Buy and the exchange will place your order.
Bitfinex, OCO order
If the market is growing, then you can open a long position - that is, buy. Then all operations will be mirrored, as in the position of the shorts.
Limit and Market orders
I always advise you to open positions with limit orders (if the market allows).
There are also market orders. That is, your long / short order will be executed at the market price (current), but the commission will be higher than with limit orders. By commissions - read the exchange guide and our exchange reviews in more detail.
Bitfinex, Limit order
He comes first in the list - a limit order.
Trailing Stop Order
An interesting tool is Trailing Stop - a moving stop.
This is an order that works like a stop (closing), but goes after the price.
Bitfinex, Trailing Stop Order
For example, you have an open position of long 1 MTC for $ 13,200. Trailing stop allows you to set the distance between the current price and the closing price in USD. In this order, set $ 50 of the difference in price movement. This means that when the price reaches $ 13,300, the trailing stop will pull up to $ 13,250. And if the price drops to $ 13,250, then it will not move and the exchange will close your position with a plus of + $ 50.
If you bought, that is, a long was opened, then bet Margin Sell. And vice versa.
As for the Bitmex exchange, there is one peculiarity for this stop order. If you bought a position, then to set a trailing stop, you must put a “-” sign in the value column.
Bitmex, Trailing Stop Order
For example, you want this stop to go up the price with a difference of 10 USD. Put the value "-10" and the exchange exposes it.
If you have a sell order open, and you want to put a trailing stop, then in the value column simply write the desired number without signs.
Trailing Stop also has its drawbacks. If the price drops sharply against your moving stop, the exchange will execute it, but not at the current price, but at the market price at the time the order is executed in the order of its turn. This can lead to the fact that the order closes your position not to zero or plus, but to minus. A Trailing Stop order can only be used on a smoothly growing market in order to maximize movement. But it is better to close a position with a limit order (short / long based on your open position), and a trailing stop - simply cancel and use it as a small insurance.
How to trade bitcoins, cryptocurrency earning strategy
The article shows only small examples from margin trading. This topic is not a single article / lecture / lesson.
Margin trading is a very risky and profitable type of trading. It takes time to study it. I hope that the article will be useful to readers, and everyone will find new and effective trading tools for themselves.
The easiest and fastest way to invest in Bitcoin cryptocurrency is to buy Bitcoin futures through a broker, especially since this can be done with a leverage of up to 1: 200. After registering in the Libertex platform, you can trade not only Bitcoin, but also other popular cryptocurrencies (Ethereum, Ripple, Dash, etc.).
All ways to buy Bitcoin
Consider all options for investing in Bitcoin cryptocurrency
Method number 1. Bitcoin brokers
Here you do not buy and sell cryptocurrency as such, you trade bitcoin futures, and your money has been in the broker's account all this time.
Forex Club has been operating in the financial markets since 1997 and has a bunch of customers from all over the world, I think this company can be trusted.
Pros: You can trade with leverage from 1: 5 to 1: 200, profitable account replenishment, all known methods of replenishment are available.
Minuses: increased risk when trading with large leverage.
Method number 2. CEX.IO
You can attach your debit or credit card (Visa, MasterCard) to the CEX.IO service and buy Bitcoin and Ethereum for rubles, dollars, euros and pounds. You can also buy Bitcoin by bank transfer.
The service requires verification (you need to send them 2 selfies, with your card in your hands and with a passport, or with a driver’s and upload a scan of the card with an identity document).
Pros: Convenience, relatively little transaction fee.
Minuses: Mandatory verification, limits on input and output (depending on the level of verification).
Method number 3. Crypto Exchange
The cryptocurrency boom has led to a cryptocurrency exchange boom and has “bred” them now unlimited, so it makes no sense to list the whole list, Bittrex and Poloniex are the largest cryptocurrency exchanges in terms of trading volume today.
Pros: a wide selection of coins for trading, a glass of prices, api for writing trading robots.
Minuses: only the exchange has information about your private keys, and some of these exchanges tend to disappear along with the money of their customers (MtGox, BTC-E are gone, who is next?).
Method number 4. Cold wallet
The safest option is to generate public and private bitcoin keys on the bitaddress.org service (turn off the Internet before generation). Next, you save the generated keys on a flash drive and on paper, transfer money to the address of the public key and check the balance. Remember the loss of a private key means an irrevocable loss of your funds!
To be able to make transfers, you need to download the Bitcoin wallet from the official Bitcoin website and generate a public key already in the client (you can import the previously generated private key). Be sure to backup your wallet.dat file, as it contains information about the private key!
Pros: security (only the owner of the private key will be able to manage your money).
Minuses: Losing a private key means an irrevocable loss of your money, less potential profit (compared to margin trading).
If you choose method number 3 or method number 4, you will need to use the services of exchangers.
BestChange is a monitoring of exchangers where you can choose an exchanger with the best exchange rate.
When someone talks about the stock exchange, people far from financial markets immediately have in their head a lot of people calling on the phone, negotiating deals, multi-million dollar contracts and other “cinema” attributes.
Once this was really so, people traded in the halls, shouted prices, called up with their customers. But now everything has moved to the Internet, and it has become much more convenient.
Exchange is a trading terminal on a computer, with a huge set of data and tools for analysis. Exchanges differ in the goods that are sold and bought on them: securities, raw materials, currency, contracts, etc. Cryptocurrency, as a new phenomenon in the financial world, also required exchanges to regulate trading. So the first cryptocurrency exchanges appeared.
Now there are only two options for withdrawing cryptocurrency: exchange and exchangers. Their main difference is that when trading on the stock exchange, you make a deal with the same other person or company that is behind him. Working with exchangers, you work directly with the company, and it provides you with an exchange in return for a fee - a commission.
The commission when working with the exchange is much less than in exchangers. And also the advantage of the exchange is that it instantly responds to any changes in the price of the cryptocurrency, constantly updating information about the rates.
In fact, cryptocurrency exchange - A huge online platform where users from all over the world exchange virtual crypts for virtual currencies around the world.
Now let's move on to an overview of the exchanges that are most popular around the world.
Ranking Top 7 best cryptocurrency exchanges
Here we have collected for you 7 official exchanges.
Bittrex
Bitrix -one of the largest cryptocurrency trading exchanges. It has been operating since 2015 and since then has firmly taken one of the leading positions. Stability in the work of sites, lack of overloads, relative reliability - this is what you will deal with on bitrix.
As for the currency pairs, there are 260 of them. Not as many as it could be, but all the popular cryptocurrencies and fiat money are collected there.
Pros:
- Commission for completed transactions 0.25%.
- A large number of trading pairs.
- Convenient tools for trading.
- The stability of the site.
The downside is that there is no Russian language, which may be critical for Russian-speaking users.
Exmo
An interesting exchange, which is good for its security and support service. The conditions for the whole world are stable, but the presence of the Russian language makes it attractive specifically for an audience from the CIS.
Pros:
- Security.
- Great customer support.
- Constant expansion of currency pairs.
- Commission 0.2%.
And at Exmo there is the opportunity to work with the ruble and popular Russian payment systems like Webmoney and Yandex.Money. This is one of the best exchanges in Russian.
Poloniex
Polonix - The second largest cryptocurrency exchange. Now she occupies the first line in popularity among ordinary traders and is not going to give up positions.
Pros:
- Over 60 tokens that appear almost instantly after entering the market.
- Great popularity.
- A small difference between the purchase and sale price.
Polonix is \u200b\u200bone of the most interesting and attractive platforms for beginners and experienced traders. It is best to engage in either margin trading, or work with altcoins.
Yobit
Exchange with a simple interface and minimal design. You will not find anything superfluous. But this does not prevent the company from taking leading positions in the provided tools for analyzing chart behavior.
Pros:
- 400 cryptocurrency pairs.
- Little commission.
- Instant withdrawal.
This is another exchange for the Russian-speaking audience. The Russian language and support for payment systems popular in the CIS make it a good place to sell cryptocurrency.
Bitfinex
An exchange that is ideal for those who do not want to be authenticated and withdraw a huge amount of cryptocurrency without restrictions. It occupies a place in the TOP 5 in terms of trade turnover. 35 currency pairs are traded.
Pros:
- No restrictions on withdrawal.
- Commission less than 0.20%.
- Reliability and nice interface.
Kraken
An interesting exchange, with one of the highest security systems. This is one of those old and reliable comrades who have been in the game almost from the very beginning of the cryptocurrency foundation.
Pros:
- Reliability.
- High degree of protection.
- The ability to receive funds by direct bank transfer.
Nova
Once upon a time it was one of the most interesting cryptocurrency exchanges. Reliability, a large number of currency pairs and a favor for beginners were valued in the first place. But this fall, the exchange is gradually stopping its work, planning to stop trading in February 2018. Therefore, if you still have savings in BTC or on air there, then it is better to withdraw them.
Which exchange to trade cryptocurrency
In order to choose the exchange on which you will trade, it is enough to determine your tasks. What currency do you have? Why do you want to buy / sell your assets?
Money does not need to be stored in one basket, it is a well-known fact. Choose the main trading platform on which you will store 65-70% of your capital. Then select 2-3 spare ones and distribute the rest on them.
As practice says, such a precaution will not be superfluous. In 2011, began to rise and gain momentum, and if not for one unpleasant circumstance, now it cost, perhaps, all 20-30 thousand dollars.
It's about hacking one of the largest exchanges in 2011. Mt Gox was subjected to a cyber attack, was hacked, and hundreds of thousands of bitcoins that the company was unable to recover were stolen from user accounts. The rating of the exchanges was lost, and it went bankrupt.
And also, relatively recently, in 2016, the BitFinex giant underwent a cyber attack, when attackers stole more than 100,000 bitcoins. These events show that the distribution of assets between cryptocurrency exchanges is now one of the most important ways to protect. After all, the currency and raw material exchanges have protection that far exceeds the successes of today's hackers, but this can not be said about the crypt and their trading platforms.
Now let's move on to more specific information. Let's try to figure out what tasks the exchanges are suitable for.
If you are going to invest large amounts in popular cryptocurrencies like Bitcoin, Ether, Litcoin and others, Bitfinex, Polonix, Bitrix will help you. If you just want to sell mined assets with minimal losses - Bitrix. If you work with altcoins and try to grab a “tasty” coin, which will increase in value over time, pay attention to Polonix, Bitrix.
If you have other needs, ask questions in the comments and we will find the right exchange for you.
What operations take place on the cryptocurrency exchange
In addition to the standard sale, most exchanges provide bidders with the following operations:
- Futures contracts.
- Option contracts.
- Margin trading in cryptocurrency on the exchange.
There is as yet no variety of operations that exist on real exchanges. But maybe it is not necessary. Let's talk more about contracts and margin trading.
Futures – a contract that is concluded for the future. That is, today you conclude a contract that the day after tomorrow buy a thousand rubles at a price of $ 20. Regardless of how much the dollar will cost the day after tomorrow, you must buy 1000 rubles at a price of $ 20.
Option - the same contract. Only at the conclusion of it it is indicated that the trader can use the RIGHT to buy an asset at such a price. That is, it can take advantage, or maybe not.
Margin trading - the combination of own and borrowed funds in order to maximize profits. That is, roughly speaking, this is a small loan that is given to the trader to complete the transaction. A trader makes a profit, takes it for himself, and repays the loan with interest. Everything is simple.
This short list of operations provides access to a truly diverse approach to making money on the exchange.
How to make money on the cryptocurrency exchange
You can earn on the cryptocurrency exchange not only by selling cryptocurrencies received as a result of mining.
Intraday cryptocurrency trading on the exchange is the most promising way to make money. Your task is to buy low, sell high. Or borrow cryptocurrency while it’s expensive, sell it and return it when it becomes cheaper. But it is only verbally simple, in fact, you will have to face a large number of pitfalls.
The easiest and most conservative way. You are an asset, transfer it to your wallet and wait until it grows. You yourself see how fast the value of the entire crypto is growing, so not investing in it would be stupid.
Some exchanges also offer their members creditors. Since exchanges rarely want to invest their own funds to trade their customers, they provide an opportunity to invest margin trading for ordinary users. By lending money, you can earn not so much, but as a way to make money you can never “sweep” this option.
What you need to know before you start making money on the cryptocurrency exchange
Making money on the stock exchange as a whole is a very difficult task. It will require a good knowledge of analytics, a mathematical mindset and decent experience in the financial markets. But before you learn how to trade on the exchange, it will take more than one or two years.
One of the bank’s employees shared information on how he learned to trade on the exchange: “I spent 3 years studying the material, about two thousand dollars and several hundred hours of trading, in order to learn how to go to 0 on the simplest trading tool - options. It’s possible that someone will succeed faster, but with dreams that you can sit down and start earning without knowledge and experience, you definitely need to leave. ”
His words just say that before speculating and trading on the exchange, you will need to study many manuals, spend hundreds of hours at the trading terminal either on a demo account or on a regular A4 sheet. It will also be useful to “pump” your emotional stability.
Watching an experienced trader, you will never understand whether he earned $ 2,000 or lost them. They control their emotions at the level of poker players. That is why it is difficult to play the stock market.
But all this was true exclusively for trade. But what about two other areas: investing and giving out money for margin trading? With these areas of earnings, everything is much simpler. Investors should not have specialized knowledge in technical analysis. Their main task is to assess the prospects of assets.
And with cryptocurrencies, everything is extremely simple. Does it have real value for? So it will grow. Doesn't have or is there a better analogue? So it will remain at the bottom.
And issuing money for margin trading is somewhat similar to lending. With one “but”: the exchange acts as a guarantor of receiving funds.
It all happens like this:
A person has 1 dollar. He takes another 9 in order to make a profit 10 times more. When the asset rises by 10%, instead of 10 cents, a person will receive $ 1 less interest for using the amount. But if the asset falls by 10%, the transaction will automatically close, since it has lost its dollar, and the system will not allow it to go into debt.
This principle is similar to the work of forex brokers, which simply close deals as soon as her account is drawn up for the whole amount + percentage for using borrowed funds.
That is, if you lend money to margin trading, the exchange itself provides a guarantee of return. Your task is to have the right amount of money to earn.
How much can you earn on the cryptocurrency exchange
This is a very interesting and important question that every bidder must ask himself sooner or later. Let's try to roughly predict the profitability based on the bitcoin chart.
If you look at the bitcoin chart, you can see that daily highs and lows often exceed 1,000 - 1,500 thousand dollars. That is, investing 8,000, you can get 9,500. In the most favorable scenario, you will receive from 5 to 8% for each transaction when using margin trading. But on average, the yield will be somewhere between 30 - 40% per month.
If you invest in bitcoin now, then against the background of its rise, you can earn 100-200% per annum with the current rate of recovery. This is the most optimistic option.
If you give money to those involved in margin trading, during periods of hype you can raise up to 50% per month. But in periods of recession, few will buy your assets, so often assets can stand idle up to 3-4% per month. On average, you will receive 50-60% per annum with an average investment style, not really following the market trends.
As you can see, with an increase in profitability, risks also increase. The safest is lending to those who want to engage in margin trading, with a yield of about 50% per annum. The most profitable is intraday trading with huge risks.
Small forecast for cryptocurrency price in 2018
Everyone is interested in how cryptocurrency will behave in 2018. Especially after the recent rise and penetration by Bitcoin of the psychologically important mark of $ 10,000 at the end of 2017.
Let's try to figure out whether Bitcoin will grow, and with it the whole cryptocurrency. First, let's talk about why it is so popular. Due to the fact that crypto implies anonymity of transactions, most people will use it in order to hide their payments from the state. The shadow sector of the economy, despite the fact that the world is actively fighting it, has been, is and will be.
Plus, among other things, cryptocurrencies are created that will be really useful for business. The same broadcast and its system of smart contracts, which guarantees the execution of every transaction recorded in its protocols. This makes crypto now one of the most interesting, and most importantly, sought-after assets on the market. Large companies are interested in blockchain, and in order to use the services of the same smart contracts, you need to purchase ether.
That is why in the long term, cryptocurrency will always grow. And Bitcoin, as a flagship, will go forward until its idea itself is a thing of the past. But until the resource for the cue ball is fully developed, it will grow.
In the short term, everything is precarious. Many economists realize that Bitcoin is still an overvalued asset, even though in previous years it showed a growth of 1000% every 12 months. Some traders agree that the market is now artificially overheated.
But most still agree that the growth prospects of bitcoins and the entire cryptocurrency are very bright. This is also shown by the fact that even in China, with a population of more than 1 billion people, the cue-ball was recognized as illegal, they quickly recovered, rose and are still breaking new historical highs.
That is why it is worth investing in bitcoin and new altcoins. And do not assume that Bitcoin is a bubble that is about to burst. Yes, to some extent this may turn out to be an overheated asset, and most likely it is. But he will not burst as many say. He can only roll back in value, but will invariably return to his position after some time.
Conclusion
Cryptocurrency exchanges are an excellent tool for not only selling mined assets, but also making money on them. And given that this is a relatively young market, there are not so many participants in it, and therefore there are still catastrophically few really good specialists. Becoming a specialist in the field of cryptocurrencies is still very simple now. Use the moment and earn.