Margin trading means trading with borrowed funds. You put less of your own money at risk but it’s still a high-risk strategy for all but the experts.
Margin trading means borrowing money from a broker so that you can trade a financial asset, which becomes the collateral for the broker’s loan. Margin trading is potentially one of the most lucrative ways of making money with cryptocurrencies, but while it can be highly rewarding, it could also lead you to lose everything very quickly.
The borrowed money is called leverage, which you hope to return to a broker after a successful trade. If you borrow 10 times more than the stake you put in, it effectively multiplies the potential profit that you can make by 10 times as well.
But the massive rewards come with massive risks and margin trading also has the potential to magnify your losses by an equal amount that can be potentially devastating. And if margin trading with traditional assets wasn’t risky enough, the extreme volatility of crypto assets makes margin trading even more of a scary prospect. Even veteran traders should be wary of margin trading, so think carefully before you go down this path.