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What is margin? Opportunities and risks with margin trading for newbies

margin trading concept

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Margin or margin trading is the most attractive form of trading for all traders.

Although forex, electronic money or any market, it is a good bait for those who have experienced in the market for many years. For newbies, margin trading is like gambling.

Margin in addition to being influenced by financial capital management, also related to emotional management.

For some people it is quite distant, sometimes misunderstood concept. You probably also hear people say: Am I trading margin, long up, short down, x25, x100 or show pictures with % written there but don't understand what is right?

Today Blogtienao will give you the whole concept of margin. Let's see how it works and makes such a huge profit.

What is margin?

Margin (margin trading) is a form of trading where you use leverage to buy an investment with an amount greater than your own capital.

The simple explanation of margin is as follows: With a small amount, you can open a larger trade, maybe several hundred times. And then, when the price moves in your favor, you make a huge profit.

But the possibility of the price not moving or moving in the direction against you. Example: I see a trade that looks good and plays big using big money, big leverage. And then I saw a self-closing order on the exchange and suffered a huge loss.

So you can experience 2 sides of margin trading already. Great profits and equally risky.

Margin's Chance

First, evaluate the opportunities it offers:

  • Increase investment amount
  • Diversified investment opportunities
  • Accounts skyrocketing fast

Increase investment amount

This is obvious. You can control and trade large amount by borrowing money from the exchange. While only with your capital, the purchasing power increases many times.

Diversified investment opportunities

Margin trading not only gives you the edge when it comes to taking larger-than-usual positions, but it also gives you the flexibility to build your portfolio.

Normally you have a small amount so it can only take one position at a time. But with margin trading, you will be able to split your capital to open multiple trades at once.

So you have the opportunity to diversify your investment at a time.

Accounts skyrocketing fast

Before margin trading, have you thought about how to increase your account balance exponentially with a small balance? It must be difficult.

Trading on margin offers the opportunity to participate in different markets at the same time of the day. Thus get more profit from trading and your account grows exponentially, and also easier to manage.

Margin's Risk

A delicious piece of cake is hard to eat, friends. At first glance when you see the huge benefits, it is also necessary to evaluate its risks. However, if it is managed with discipline, you will avoid the risk it poses. So what does the risk include?

Increased risk

This is the most obvious disadvantage of margin. To be able to take control of a position much larger than usual means that not only can profits be bigger, but your losses also skyrocket.

This is why you must follow very strict capital and risk management rules when using margin.

Stress from not being able to handle emotions

Some traders cannot handle the emotion of opening a position that is too large. Because the volatility in their unrealized profit or loss is too great.

This causes them to make the wrong decision. Letting emotions get in the way of your trading decisions will cost you money in the long run. If you cannot handle your large volatility then you should start with small leverage.

Terms related to Margin

Margin has one of the following related terms:

  • Margin (margin) the amount you use to buy the investment
  • Leverage (leverage): Using leverage is the time to increase your investment. For example invest $100 with x100 leverage, that means you are investing that $10000. Leverage can be very large depending on the provider.
  • Volume: is the product of (Margin) x (Leverage).
  • Position: That is, the position includes Long (buy) , and Short (sell).
  • Liquidation: This is the liquidation price. For example, you bet on Bitcoin margin. When the BTC price crosses the liquidation price, then all your invested capital will disappear.

Watch now: What is Bitcoin? The most comprehensive information about virtual currency BTC

How Margin . works

For example, you bet on a margin on an exchange with an entry capital of Bta $

Step 1: You perform technical analysis and make a comment for yourself:

  • If you expect the price to rise, you use the position Long.
  • And if you think the price will fall, you open a position Shorts.

Step 2: You choose your leverage. For example, if you use a leverage of 10, the amount you borrow from the exchange is (10-1)*Bta = 9*Bta.

  • The general formula for the loan amount is (Leverage-1)*Enter amount.

Step 3: As a result of the above investment, there will be 2 basic cases happening:

  • TH1: You want to close the order or the floor closes the order when the profit level is reached. The result of the transaction is that you have a profit. Money is added to your account
  • TH2: Price moves against your position. And by the time it reaches the liquidation price, the exchange will recover the amount you invested. As a result, you lose.

End: In both cases, after the closing order process, you have to pay back the amount you borrowed and will pay an additional fee for your loan.

Summary : The process of trading margin goes through the following summary chart:

margin trading principles

Experience in trading margin to prevent risks

Why do I use the word hedging, instead of using the word making a lot of profit? Because many people mistakenly believe that: Margin generates huge profits, so it is not difficult to get rich with it. But they were really wrong.

For those who are good traders and get profit from margin trading. Here, I am referring to non-negative profits, not huge profits. They have drawn a few basic experiences as follows:

  • Investment: It is your own capital, which is your own idle capital. Do not use borrowed capital or capital shared for a certain family or society.
  • Lever: Appropriate leverage if not for that very quick liquidation. Professional traders often say: “Instead of entering a $1 order using X100 leverage, enter a $100 position using X1 leverage”.
  • Building strict trade laws: Must be serious and respect discipline to expect to make money from it.
  • Do not let emotions mix (Frustration, revenge, ...): Set a profit, to that point it's best to take a break. Or keep playing but the leverage is extremely small. If a long/short loses, close the machine and relax.
  • ...

Which floor should I play (hit) Margin on?

I provide you with the best playing decks today. Along with that is the fee and community review score. Please refer to and register the link I have available:

NumberFloor NameFairyRegistrationEvaluate
1Snapex0.15%Sign Up Link7/10
2Binance Futures0.04%Sign Up Link7/10
3LMT . floor0.075%Sign Up Link7/10
4Bingbon0.045%Sign Up Link7/10
5Bityard Exchange0.1%Sign Up Link7/10
6Bybit exchange0.075%Sign Up Link7/10

In short, I have outlined for you the problem of margin trading. Please plan carefully when entering this market. Close!

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