FAQ / Margin trading

What is margin trading?

Last updated: January 10, 2019

Margin trading with cryptocurrency allows users to borrow money against their current funds to trade cryptocurrency “on margin” on an exchange. In other words, users can leverage their existing cryptocurrency or dollars/euros by borrowing funds to increase their buying power.

For example, you put down $25 and leverage 4:1 to borrow $75 to buy $100 worth of Bitcoin. The only stipulation is that no matter what happens, you’ll have to pay back to $75. In order to ensure they get the loaned amount back, an exchange will generally “call in” your margin trade once you hit a price where you would start losing the borrowed money (as they will let you borrow money to trade, but they don’t want you losing that money). A margin call can be avoided by putting more money into the position.

As of now, Cryptology has 2 different leveraging options (5:1 and 10:1) for BTC/EUR. Margin trading can be done short (where you invest based on the price going down) or long (where you invest based on the price going up). Further, it can be used to speculate, to hedge, or to avoid having to keep your full balance on an exchange.