Table of Contents (click to expand)
- What you should know about Leverage trading on BitMEX
- What’s BitMEX Leverage?
- Going Long
- How you can use leverage to trade on BitMEX
- Myth: Leveraged Trading is tied to expensive fees!
- What Is Cross Margin Leverage
- Using Leverage – The De-Risking Way
- Can I open a 50x Trade here?
- Think Leverage Different!
- Increasing the Leverage In-Trade – Does it increase the profits?
- How To Calculate The Right Position Size for a Leveraged Trade?
- Tips on how to reduce leverage trading risk on BitMEX
What you should know about Leverage trading on BitMEX
Bitcoin and other cryptocurrencies are known to be highly volatile due to the unstable nature of their prices. The value of cryptocurrencies may fluctuate several within a short period. However, it is possible to turn a volatile market into a profit-making opportunity by considering leverage trading via Bitmex. Bitmex is seen by many as a popular crypto exchange that provides traders with the chance to carry out trading activities by making use of leverages of about 100:1. With BitMex, traders get a trading platform where they may be able to amplify their gains, which may also lead to higher losses.
Traders must understand how leverage works and the risks involved in trading with leverages. Leveraged trading with BitMEX may be highly profitable if you know how the market operates and how the leverage works. It would help if you carried out thorough research before committing your resources and time when trading with leverage due to the high risk involved. We shall be exploring the leverage BitMEX concept and how it may be beneficial to advanced traders. Let us begin by finding out what leverage is all about.
Everyone who trades with leverage, be it on BitMEX, Binance, or Bybit or which else bucket shop might be popping off right now, should be aware of how to use leverage correctly. Leverage is a tool to DE-RISK your trades actually, and indeed it can bring down the involved risk in your trades if you use it mindfully. Sadly the opposite is often the case. So let’s get through the basics of leverage trading and also debunk some myths on that way.
What’s BitMEX Leverage?
To leverage a position means basically that you borrow funds to be able to increase the position size in contracts while using less from your capital/margin. Depending on how you use this tool it can decrease the risk by decreasing the used capital and set funds free for other trades. At the same time, it can increase your chances of getting liquidated. You can go 1x leverage, but also BitMEX 100X leverage.
Important to note:
– High Leverage = Closer liquidation price
– Low Leverage = Distant liquidation price
Leverage for De-risking means:
– to free up capital for trades on several instruments, like hedges
– to enable you to keep less of your capital on an exchange in Seychelles.
Things to consider when trading cryptocurrencies with leverage
There are two options available to a trader when using leverage to trade on cryptocurrency; they include:
Going short as a leverage trading term is when you purchase a contract because you are convinced that the asset in question will appreciate.
Shorting is called a situation where you decide to sell a particular contract because you feel that the price will depreciate so that you can buy back the contract at a reduced price.
When a trader opens up a position, a part of your investment capital is used as collateral for the funds you are borrowing from the exchange. If the market is favorable and you have a successful trade by closing the position with a profit, the exchange returns your collateral to you alongside your earnings. However, trading fees are subtracted from your account. On the other hand, if the market is unfavorable and you end up losing your trade, the trade will close. Your collateral may become liquidated when the market gets to a specific price referred to as the liquidation price.
How you can use leverage to trade on BitMEX
To trade on BitMEX with leverage, you may have to go through some simple steps. Firstly, you should understand that BitMEX offers a variety of cryptocurrencies for you to trade on. All losses and profits are usually settled in BTC, which BitMEX recognizes as XBT. This means that funds withdrawal and deposits have to be done using Bitcoin instead of dollars, which are used for trading against cryptocurrencies during actual trading.
Now that you are aware of the accepted currency on the BitMEX trading platform, let us see how you can make use of leverage to carry out trading on BitMEX.
- Register your trading account on BitMEX
The first step that a trader has to take to trade on BitMEX with leverage is to open a BitMEX account. To do this, enter into the BitMEX website and then register your account by creating a password and providing your email address in the box shown on the right side of your screen.
As part of a security process, BitMEX may require you to verify your email by clicking on a link sent to your email address. After verifying your email, it is essential that you enable the two-factor authentication to increase your account’s security level.
- Deposit funds into your BitMEX account
After completing your registration process, the next step is to make deposits into your account. To do so, you have to select the Account tab, which is located at the top part of your device screen, then redirects you to the crypto wallet. Selecting the deposit tab and proceed to copy or scan the QR code to your wallet address. You can then make use of that address in depositing Bitcoin into your BitMEX trader account.
- Navigate the BitMEX trading screen
By clicking on the Trade link located at the top of your screen, you will be redirected to the trading environment. You can select the type of crypto you wish to sell or purchase. The BitMex trading platform allows traders to trade on cryptocurrencies such as Litecoin, Ripple, Cardano, Ether, and Bitcoin Cash.
- Enter your position details
On your screen, you will find the Order box. Select which order you would like to place. Take, for example; you are placing a market order, enter your trade quantity (the amount of crypto you intend buying or selling in USD.
- Set up your leverage
After entering your position details, the next step is for you to set up your leverage. You can do this by using the slider located underneath the Order box. We advise that you should be careful when you adjust your leverage on BitMEX to avoid selecting the wrong leverage level.
- Review your transaction details
Once you are done setting up your leverage, it is essential that you carefully review your transaction details. The Quantity aspect displays your position value. However, since you are trading with the use of leverage, your staking amount may be lower than what is displayed in the quantity field. The Cost field shows the maximum amount that a trader can lose on that trading position if the market ends up becoming unfavorable. The Order Value displays your position value in XBT.
- Make your position open
If you feel there will be a price increase and choose to go long, select “Buy Market.” If you think there will be a fall in the price and you want to go short, select the “Sell Market” option. You will receive a confirmation order which contains information like estimated liquidation price, order value, and cost. Carefully review all the details before you click on “Sell or Buy” to confirm what you are ordering.
Myth: Leveraged Trading is tied to expensive fees!
This is bullshit. The fees by BitMEX are calculated by contract size and by order type. If you buy 1000 contracts with 1x for 0.2510 BTC or 1000 contracts with 100x for 0.0028 BTC there is no difference in the charged fees.
If you market
Cross Margin Leverage
Cross-Margin is an advanced form of leverage and a riddle to the most. However, it is easy if you know how it is calculated, but still a tool only to be used by advanced traders.
The usual leverage 1x – 100x is isolated, this means only the used margin is at risk. If you use 0.1 BTC for a trade in an account with 1 BTC the maximum you can lose is 0.1 BTC. Cross-Margin is different as it is not isolated anymore, it uses your entire balance in your account. This means a liquidation equals a completely wiped account. You cannot use liquidation as stop-loss as this means total destruction.
If Cross, then stop-loss is a must. Cross-Margin uses leverage dynamically and is ultimately defined by the position size divided by the account balance. This results in your liquidation price. Cross shows the ROE as if 100x was used.
Using Leverage – The De-Risking Way
Use Case 1: Free Up Capital
This is a nice method of using leverage completely risk-free: If you want to place the above example position of 1000 contracts at a XBT price of ~4000 USD, you’d place the order with 1x Leverage for 0.2510 BTC. Let’s say you go long and the price moves up $50 and you feel safe to put your stop/loss to your entry. Now you can switch the leverage to 100x without any risk!
You will have the same profits, but you risk now only 0.0028 BTC for this position and you can work with the rest of it again on other pairs. Or enjoy the extra safety (like not risking much if a stop doesn’t execute). You can now lose only 0.0028 in this isolated trade, no matter what happens.
Use Case 2: Create Un-Liquidatable Leveraged Positions with CROSS
Cross has the reputation to be the most dangerous leverage option on BitMEX as it is not an isolated trade anymore and uses your whole balance. This is true – it can burn down your complete account with one major power move. However, it can also offer you the chance of leveraged positions which cannot be liquidated (or are
The key point here is the number of contracts. Simply use the BitMEX calculator to find out how big your position can be, without any or near to no risk of liquidation. This is especially interesting for short positions, as they have a clear bottom (can’t go below zero). Now see the screenshot:
As you can see the price of XBT would have to reach a price out of imagination to liquidate my short position. With a 5 Bitcoin sized account, I can take easily a 10000 contract sized short position without risking a liquidation. On Cross, the above position would initially deduct 0.2967 BTC from my total margin and once we can
Use Case 3: Catch the Bottom with Leverage
OK, this is more of a theoretical use case, a mind game what would be possible. Let’s say we assume 3-4k is the bottom of Bitcoin in the bear phase and we want to ride a long-term position all the way up again. As this is a long position the theoretical option of getting liquidated is there plus we gotta keep in mind the funding rate, – hence this is still very risky. Actually, it doesn’t belong in this post, but I found the thought interesting in theory.
We would place a position, let’s say we place an order for 1000 contracts at $3.5k with CROSS enabled and a 5 BTC wallet.
Our liquidation price would be $189.5 – so without stop/loss, the complete capital is still at risk theoretically. But if one would definitely want to take that gamble, this would be the way to be. On top, he could be laddering the 1000 contracts within the 3.5k to 3k range. Once the price starts to move up, he would raise the stop/loss accordingly and once stop/loss it is at the entry, he could go 100x and could ride a 100x leveraged position all the way up to 100k
Can I open a 50x Trade here?
If you see someone asking such a question or bragging about a high leverage trade, you can call him out as a noob. Why? Because it doesn’t matter and he didn’t get the basic thing:
IT IS NOT ABOUT THE LEVERAGE, IT IS ABOUT THE CONTRACT SIZE IN RELATION TO YOUR PORTFOLIO SIZE.
A person who brags about a 50x or 100x position is whether a) maintaining an oversized super-risky position which might get wick-
Think Leverage Different!
Leverage is not there to offer you a BitMEX Casino, it is there to limit your risked capital. A trader should really never become liquidated – I mean like never. Liquidation rate = zero = imp. You
a) always want to make use of trades with a proper risk/reward ratio and
b) obviously use a stop/loss for that.
Once you get it doesn’t really matter if you use 5x or 100x as the outcome will be the same if you calculate your position size properly in relation to your total balance, you will find much stuff funny which you find online in regards to leverage.
Screenshots in your Telegram chat groups/Twitter mean nothing!
If your Broseph in your Telegram chat group brags with screenshots like this:
Stay unimpressed – as the reality pretty sure looks like this if you see the full picture:
ROE Screenshots mean NOTHING. The only information they contain is that someone owns a position which is not in the red.
Increasing the Leverage In-Trade – Does it increase the profits?
Hooray, finally you hopped into a positive position. Damn, now you are on the right side of the trade, you wanted to play safe and used fewer funds and low leverage. But hey – you can switch to 100x. Should increase your profits 100x as well, right?
Now – this is something many novice traders tend to think or ask themselve. Switching the leverage button does not increase your profits, but decreases your risk a.k.a. your actual used margin on the position.
How To Calculate The Right Position Size for a Leveraged Trade?
The professionals by 4C-Trading have a great calculator designed for exactly that question. Feel free to copy it to your Google account and exploit forth and back: Position Size Calculator by 4C-Trading
Tips on how to reduce leverage trading risk on BitMEX
The following tips may help you to reduce risk while trading on your BitMEX account with leverage.
- Start small
You should deposit a minimal amount of funds into your account when trading with leverage for the first time. By so doing, your losses are minimized if the market is unfavorable.
- Reduce your leverage
It is critical not to get carried away by the prospect of earning big when you trade with the maximum leverage, especially for a rookie.
- Choose a market
Instead of diversifying into several markets, it may be advisable to choose a specific market to understand the trends and price movements better.
Leverage trading on BitMEX is very profitable, but the risk is high. Ensure that you understand how it is carried out before you venture into it. Make use of limit trades instead of market trades or better still, let only those who are more experienced trade with leverage on BitMEX. The reminders are main throughout this article, be sure to read it a few times and repeat the steps as far too many bitmex traders go to the traders grave yard by using too much leverage and not knowing how to correctly control the bitmex monster, who in our opinion is just Arthur laughing as he makes your Bitcoin his…