When the price of Bitcoin recently started plummeted, some traders made a killing with Bitmex leverage trading. Instead of hodling and hoping for a miracle, those who shorted BTC, were smiling from ear-to-ear. So, what is leverage trading and how easy is it really to make money on Bitmex?
How does Bitmex leverage trading work?
Leverage trading or margin trading means you borrow funds when buying or selling cryptos to increase your buying power. This means you can open larger positions that exceed your account balance. Should the trade be successful, you can make profits of 5 – 10 times. For example, if you have an account balance of 1 Bitcoin (known as XBT on Bitmex) and you open a trade with a leverage of 10:1, you will in actual fact be placing your bet with 10 Bitcoins.
You can open a long position if you are betting that the price of a specific crypto is going to go up. A short position means you will be selling contracts if the price is going down. Either way, you can make money.
When you close your trade in profit, Bitmex returns your collateral plus profits minus trading fees. Should your trade close in a loss, your account can be liquidated should it reach the stipulated liquidation price.
Sounds great right? Not so fast. Bitmex leverage trading is super risky, speculative and utterly complicated. You need to know a thing or two about trading before signing up to Bitmex. When trading on Bittrex for example, one can simply hodl onto a crypto until it goes up again. However, you can blow your account on Bitmex and lose all your funds if you are not careful.
But first, a warning
It is said that Bitmex leverage trading is riskier than Forex trading. Regardless, there is money to be made. Take note of the following:
Start with a few practice trades until you are more familiar with the platform. Pick one market like XBT/USD and practice trading until you are confident.
Start with a small amount in your account. Stay away from 10 x leverage until you are confident with the platform. It means that should your trade not work out the way you wanted it to, you will not lose a lot of your funds. It’s a good way to limit risk.
For more on Bitmex liquidation, click here.
Getting started on Bitmex is easy. All trades, profits, and losses are settled using Bitcoin, or XBT as it is known on Bitmex. Users can deposit and withdraw Bitcoin.
- Start by registering for a Bitmex account. Here is a link to the website. Remember to activate the Two-factor authentication to ensure the security of your account.
Read Bitmart’s blog “2FA – Absolute must or nice to have?”
- Deposit Bitcoin into your account. Go to the “Account” tab and click on “Deposit”. You can deposit by scanning the QR code or with your Bitmex Bitcoin wallet address.
- Once the funds have been allocated to your account, you can start trading. Click on the “Trade” button at the top of the screen. You can choose to trade with Bitcoin, Bitcoin Cash, Cardano, Ether, Ripple and Litecoin.
- To enter a trade, go to the left side of the screen to select your trade aka a long or short trade. Be sure to enter a new trade by means of a Market Order. Select how much you would like to buy and click either on ‘long’ or ‘short’.
- Setting your leverage is very important. It is safe to start with leverage of 5x as it is low risk. Leveraging more than 10x means increased risk.
- Make sure the details of your transaction details are correct. “Quantity” refers to the value of your trade. This may vary depending on the amount of leverage you chose. “Cost” shows how much you stand to lose should the trade fail whilst “order value” shows what the value of your trade in XBT will be. If you are satisfied, click “buy market” or “sell market” depending on whether your longing or shorting.
- Next, a confirmation window will pop up. This is another opportunity to double check your position.
In conclusion, remember to always have a stop loss in place since your account can be liquidated should the trade go in the other direction. It is easy to set your sell price on Bitmex. Simply type your sell price into the window on the left and once the trade has reached the price, it will buy or sell depending on whether your longing or shorting.