Margin trading is a strategy that involves borrowing money from a 3rd party to open positions. Broker usually becomes that 3rd party that provides credit to a trader.

The use of borrowed money means leverage, which amplifies potential gains as well as losses. Hence, margin trading is an inherently risky strategy. More so in a volatile market such as cryptocurrencies.

Aside from bearing additional risk, margin trading has other costs. For example, borrowed funds do not come for free. Trader needs to pay Broker interest for using these funds, which may come in a form of open fees, rollover fees, and close fees.

Though leverage in margin trading amplifies gains, these gains might not always be the end goal of engaging with this strategy. Oftentimes margin trading is used to hedge the existing exposures due to lower capital requirements for establishing a hedge. It means if a trader has a position that can potentially lose value due to an adverse price movement of the underlying asset, margin trading can help to establish positions that would compensate for these losses. For more details about using margin trading for hedging purposes, read THIS article.

Only skilled traders who thoroughly understand the risks and the costs of margin trading should engage with this strategy.

To understand how Leverage works in margin trading, check out this article.

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