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

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2021-03-22 23:38:04

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 prey for those with many years of experience in the market. For newbies, margin trading is like gambling.

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

For some it is quite far-fetched, sometimes misunderstood the concept. Surely you also hear people say: I am hitting margin, long up, short down, x25, x100 or show the% images there but do not understand what is right?

Today CHK will give you the whole concept of margin. Let’s see how it works with such huge profits.

What is Margin?

Margin (margin trading) A form of trading in which you use leverage to buy an investment with an amount greater than your equity.

Simple explanation of margin is as follows: For a small amount of money, you can open a larger trade, maybe a few hundred times more. And then, when the prices change in your favor, you reap huge profits.

But the possibility that the price is not moving or moving in a direction against you. Example: I see a transaction that looks good and plays big using a large amount of money, with great leverage. And then I saw the order to close itself on the exchange and suffered a huge loss.

So you can experience the 2 sides of margin trading already. Great profits and risks are no less.

Margin’s chance

First, evaluate the opportunity it offers:

  • Increase investment amount
  • Diversify investment opportunities
  • Accounts skyrocketed

Increase investment amount

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

Diversify investment opportunities

Margin trading not only gives you the advantage of taking larger positions than usual, but also gives you the flexibility to build your portfolio.

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

Hence you have the opportunity to diversify your investments at one point of trading.

Accounts skyrocketed

Before margin trading, did you think how to make your account balance soar exponentially with the meager balance? It must be difficult.

Trading on margin offers an opportunity to participate in different markets at the same time of the day. As a result, getting more profits from your trading and accounts increases exponentially, and is also easier to manage.

Margin risks

Delicious cake is difficult to eat guys. At first glance you see the huge benefit, you also need to evaluate its risks. However, if it is disciplined you will avoid the risk it poses. So what’s the risk?

The risk increases

This is the most obvious downside of margin. Being able to control a position much larger than usual means that not only can your profits get bigger, but your losses are also skyrocketing.

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

Stress due to not being able to process your emotions

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

This caused them to make the wrong decision. Putting emotions in the middle of your trading decisions will cost you money in the long term. 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) money you use to buy the investment
  • Leverage (leverage): Using leverage is the time to increase your investment. For example investing $ 100 with leverage x100, you are investing that $ 10,000. Leverage can be very large depending on the vendor.
  • Volume: is the product of (Margin) x (Leverage).
  • Position: That is, the position includes Long (buy in) and Short (sold out).
  • Liquidation: This is the liquidation price. For example, you type Bitcoin margin. When the price of BTC passes the liquidation price, 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 type margin on an exchange with an amount of capital to order is Bta $

Step 1: You perform technical analysis and give yourself a comment:

  • If you expect the price to go up, you use the position Long.
  • If you perceive the price to go down, you open the position Short.

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

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

Step 3: The result of the above investment will have 2 basic cases:

  • TH1: You want to close an order or an exchange to close an order when the profit level is reached. Trading results are profitable. Money is added to your account
  • TH2: The price moves against your position. And by the time it reaches the liquidation price, the exchange will recover the money you invested. As a result you lose money,

End: Both of the above cases, after the close order process, require you to pay back the money you borrowed and will pay an additional fee for your loan.

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

margin trading principle

Experience trading margin to prevent risks

Why do I use the word hedging, instead of using the word to generate a lot of profit. Because many people mistakenly think: Margin makes huge profits, so getting rich with it is not difficult. But they were wrong.

For good traders and get the rewards of trading margin. Here, I mention non-negative profits, not huge profits. They have learned some of the following basic experiences:

  • Investment: As your own capital, your own free capital. Do not use borrowed capital or capital that is shared with a certain family or society.
  • Lever: The right leverage if not liquidated very quickly. Professional traders often say: “Instead of entering a 100 $ position using X100 leverage, you should enter a 1000 $ order using X10 leverage“.
  • Build strict trade rules: Must be serious and respect the discipline to expect to make money from it.
  • Don’t let emotions mix (Exasperation, revenge, …): Set a profit, that is best off play. Or continue playing but the leverage is extremely small. If a long / short loses, shut the machine to rest and entertain your mind.

Which floor should play (hit) Margin?

I provide you with the best playing floors today. Along with that is the fee and community rating. Please refer to and register the link I have available offline:

In short, I have outlined for you the problem when playing margin already. Please plan carefully when entering this market. Dear!

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