BitMEX is a platform where you can carry out Leverage Trading, also known as Marginal Trading with cryptocurrencies. Off late, there’s been a lot of hype around this exchange, largely due to the amount of money that people have been making on this platform. But what people really don’t know is the fact that, if your trades go wrong you can lose all of your money too. So before we go into the finer bits of it, lets first understand what leverage trading is.
What is leverage trading?
Like mentioned earlier, leverage trading is often referred as marginal trading too. This type of trading is a process by which you borrow funds to increase your returns while buying and selling cryptocurrency. Therefore, when a trade is leveraged – your buying power increases and thereby you may open postitions that are much larger than your actual account balance.
For example, if you have an account balance of 5 BTC and you want to place a trade with leverage of 10:1, you can open a position worth 50 BTC. This means that if the market moves in your favor, you’ll be able to access 10 times the profits; however, it also has the effect of magnifying losses when the market moves against you.
- BitMEX is a Peer-to-Peer Trading Platform that offers leveraged contracts that are bought and sold in Bitcoin.
- BitMEX only handles Bitcoin. All profit and loss is in Bitcoin, even if you’re buying and selling altcoin contracts. BitMEX does not handle fiat currency.
- BitMEX allows trading with a high amount of leverage.
Leverage Trading on BitMEX
Follow these step by step procedures to gain a foothold on your trades;
Step 1. Register for a BitMEX account
Open BitMEX on your browser, and register for an account by providing your email address and creating a password in the box at the right of screen. In a few seconds, you will be emailed a link which you’ll need to click on to verify your email address. Finally, make sure that you enable the 2-factor authentication which will add an increased level of security for your account.
Step 2. Depositing Funds into your account
At the top of the screen, you will be find a tab labelled “Account”, click on that to open your wallet. Next, click on the green “Deposit” button and scan the QR code or copy your wallet address. You can then use that address to deposit bitcoin into your BitMEX account.
Step 3. Navigate to the trading screen
Click the “Trade” link at the top of the screen. You’ll be taken to the trading screen where you can click the tab of the crypto you want to buy or sell – bitcoin, Cardano, Bitcoin Cash, Ether, Litecoin and Ripple are all available.
Step 4. Enter the details of your position
In the Order box on the left of the screen, select the type of order you want to place. For this example, we’ll be using a Market Order. Enter the quantity of your trade, that is the amount you want to buy or sell in US dollars (USD).
Step 5. Set your leverage
Set the desired level of leverage for your position, using the slider below the Order box. In this example, our leverage is set to 5x.
Step 6. Review the details of your transaction
Next review all the details of your transaction. The value of your position is shown in “Quantity” field, but because you’re trading with leverage, the money you’re putting at risk is less than this. The “Cost” field details the maximum amount you can lose on the position if the market moves against you. “Order Value” shows the value of your position in XBT.
Step 7. Open your position
If you think the price will rise and you’re going long, click on “Buy Market”. If you’re shorting because you think the market will fall, click on “Sell Market”. An order confirmation screen will appear and contains information such as the level of leverage, order value, cost and the estimated liquidation price. Review all details carefully before clicking on “Buy” or “Sell” to confirm your order.
Bitmex is a cryptocurrency-based CFD trading platform. Their trading pairs include various cryptos that users can trade via a contract for difference. Bitmex offers high levels of leverage (up to 100x) and uses a Fair Price Marking system to fairly price both their perpetual and futures contracts. Bitmex has its own order book. You can buy and sell crypto CFDs through their exchange. Aside from the Bitmex exchange pricing, trades are also valued (and liquidated) according to Index Pricing. Bitmex calculates the spot price of Bitcoin contracts by factoring their pricing at both Bitstamp and GDAX.
Many crypto traders turn to Bitmex because of their high leverage trading options. You can trade up to 100x on Bitcoin contracts. Ethereum can be traded with up to 50x leverage. Litecoin caps at 33.33x leverage. The other listed altcoins (Tron, Ripple, etc.) can be traded with up to 20x leverage.
Risk management tips
Trading with leverage is complicated and risky, so remember these simple tips to minimize your risk:
- Practice makes perfect. BitMEX offers a practice environment that’s set up to feel just like the real thing. This lets users get familiar with placing, executing and canceling orders while interacting with a simulated marketplace. Get used to the feel of things here before trading with real funds.
- Start with a small amount. When you’re first starting out with leverage trading, deposit only a small amount into your account. This way, if the market moves against you or you place the wrong trade by mistake, your losses will be minimized.
- Limit your leverage. Don’t get seduced by the potential maximum leverage available. Especially when starting out, minimize the amount of leverage you use as this will help limit risk.
- Pick a market. Rather than spreading yourself out across several different markets, focus on one particular market (for example XBT/USD) to develop a deeper understanding of price movements and trends.
- Understand your order. When setting up your first few trades, it’s essential that you study and understand the order screen. The field to pay particular attention to is “Cost”, as this shows the maximum amount you could lose from your trade.
- Use Limit trades rather than Market trades. When trading bitcoin, BitMEX charges a taker fee of 0.075% of the total position if you use the “Market” tab when opening a position. However, if you select the “Limit” tab to become a market maker, you’ll actually receive a rebate of 0.025% of your total position.
- Leave it to experienced traders. If you’re new to either online trading or cryptocurrencies, leverage trading is not for you.
If you know what you’re doing, leverage trading on BitMEX can be an effective tool to help you increase profits. However, make sure you’re fully aware of all the risks involved before deciding whether this is the right approach for you.