How to Trade BTC and What Is Margin Trading: Beginner’s Guide

By ROKKEX on Altcoin Academy

ROKKEX
ROKKEX
Aug 13 · 6 min read

Many people who try to get rich manipulate with BTC or keep it in their portfolio. Indeed, the growth of this cryptocurrency allows you to get huge profits without active trading.

Besides, with margin trading, doubling or even tripling of assets will not surprise anyone, so many give up their previous jobs to trade BTC and other cryptocurrencies — this is really an analog of the 1849 Gold Rush, but instead of shovels and washing trays — computers and software.

If you haven’t bought BTC yet and haven’t traded it on the exchanges, it may be difficult at first, but just be patient. So let’s take a look at the basics of cryptocurrency trading, and then consider the advantages and disadvantages of margin trading.

How to Trade on Cryptocurrency Exchange

On any exchange, the trading process looks nearly the same: there is a book of orders with orders for buying and selling.

Buying a Sale Order

The simplest strategy is to buy a cryptocurrency at the selling price. This means that another trader placed the order in the book and is ready to sell at this price. The price, in this case, is slightly higher than the purchase price, but the order will be executed immediately. Simply enter the desired number of BTC, see how much they will cost, then click the “Buy” button and confirm the order. That’s it, now you have BTCs.

Placing a Buy Order

If a trader wants to buy coins at a better price, they usually place a buy order and wait for someone to sell. This is what most professionals do because patience allows them to buy cheaper. True, this approach does not guarantee a purchase, since your order may not be satisfied; especially if it implies a price that is noticeably lower than in the order book. Suppose you want to buy the HKN token. Instantly, the coin can be purchased for 0,00001299, but you choose 0,00001199. After entering the desired quantity, click “Buy,” and a buy order is formed. Now you need to wait for the trader who will execute the order at this price.

What Is Spread?

This is the number that characterizes the difference between the most expensive buy order and the cheapest sell order. The so-called market makers place buy and sell orders and get a small difference due to the spread and increase the liquidity of the market.

Trading in the Volatile Cryptocurrency Market

Why does cryptocurrency trading attract so many people? Because of the volatility, that is, sharp price movements up and down. The fact is that with a skillful approach, you can get high profits due to high volatility. To be a successful cryptocurrency trader, a beginner needs to learn how to turn off emotions, no matter how much money they lose or earn.

A trader should not be guided by feelings, but by fundamental or technical analysis — this is precisely what makes a professional different from a beginner.

What Is the Best Cryptocurrency Exchange?

Over the past couple of years, several Bitcoin exchanges went bankrupt, hacked, or ran into problems due to regulation.

Nevertheless, at the moment, most traders still use several large exchanges, as they provide maximum liquidity and are easy to use. Also, do not deal with the Chinese cryptocurrency exchanges, because they are in the process of liquidation — they are closed by the Chinese government.

Soon we’ll issue a detailed guide on how to choose the most suitable exchange based on your needs. If you can’t wait that long, you can already try our recently released cryptocurrency exchange ROKKEX, that’s simple, user-friendly, and secure!

How to Start Trading Bitcoin and Other Cryptocurrencies?

First, load a sum of fiat currencies into a cryptocurrency exchange. Then, buy BTC and transfer it to your account wallet on the selected exchange. Once coins appear in the BTC wallet of the exchange, they can be sold.

If your trading strategy supposes HODLing, then it is not recommended to store BTC and other cryptocurrencies on the cryptocurrency exchange for a long time. However, if you don’t have any other way out, you should better focus on a platform that sets security as their priority and provides advanced tools for storing money.

The chosen cryptocurrency exchange should have a cold-storage for sure. For example, ROKKEX partnered with Ledger to ensure the highest protection possible. Ledger provides the first and only certified hardware wallets “to build digital asset operations at speed and scale.” We chose Ledger Vault because it’s the world’s first institutional-grade, multi-authorization wallet management tool.

Margin Trading

Margin trading is one of the most profitable but at the same time, risky strategies. It lies in the fact that a trader borrows capital at a relatively high percentage to increase his leverage. If everything is in order, you can earn a lot, on the other hand, the wrong move can ruin everything — first, the platform will ask you to increase the margin, and then eliminate the order with the loss of all funds.

There are exchanges that offer a leverage of 1: 1 — this means that a trader can borrow as much as they have. Thus, a trader with a balance of 1 BTC will trade 2 BTC, increasing the potential profit. Other exchanges offer leverage of 2.5: 1, 3.3: 1, 20: 1, and even 100: 1. When trading with a 100:1 leverage, you will either earn 100% in a few minutes or go broke in the blink of an eye.

How to Trade with Leverage?

There are two main options: it is a long position, or a rising game (you bet that the asset will rise in price), and a short position — a short game (a bet that the price will decrease).

If you are sure that the price is moving in a certain direction, you can use the leverage to maximize the gain from the right decision.

What Are the Advantages of Trading with Leverage?

If everything goes right, with the help of a leverage a trader can earn more than by trading solely on their own funds, but in order not to lose all the money, you need to be able to manage risks.

What Are the Disadvantages of Trading with Leverage?

Remember that the interest rate on borrowed funds is high, and these fees are automatically charged at the time of closing the position. In addition, if you incorrectly predicted a change in the value of an asset, your position can be eliminated with complete loss of funds.

Margin-Call or Demand to Replenish the Deposit

If trading with leverage does not go as planned, the exchange will at some point ask you to replenish the account (this is called margin-call) to avoid the liquidation of the order. If the trader cannot provide additional funds to secure the order, it will automatically be closed.

How to Maximize Profits and Minimize Risks

To get the most out of trading with leverage, you need to be able to manage risk. A novice trader should start with small amounts and no more than 2:1 leverage. Besides, it is better not to use all your funds in a single transaction. If you transferred $1000 to the cryptocurrency exchange, and in the very first transaction you used $100 with a double shoulder and lost, you will still have $900.

The trader should decide how aggressive the strategy they want to follow. It should be borne in mind that leverage allows you to earn much more than the use of equity capital, and an investor with good margin trading experience can significantly benefit from successful transactions, writing off losses to unsuccessful ones.

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