Top 7 Crypto Margin Trading Exchanges Reviewed

After spending hundreds of hours reviewing the best crypto margin exchanges we decided to write an educational article on the topic. What are these exchanges, how does it work, what are the costs, and what are the risks of using borrowed funds when trading cryptocurrencies? These are some of the most frequently asked questions by beginner investors and this guide will try to explain the concept behind margin trading on cryptocurrency exchanges.

If you haven’t already tried a margin trading exchange you are in for a treat because these platforms are not like any other exchange you have seen before. Margin trading crypto means increased buying power and this can lead to significant gains, but don’t get me wrong, this style of trading is very risky if you don’t know how to do it and we highly recommend that you spend a good amount of time learning the ins and outs before starting. Today you will learn the ins and outs of these platforms, how to use them, the pros & cons, all products offered, and the most common risks.

Content table

Below is our top list of the best platforms where we highlight our top picks from our database of cryptocurrency exchanges. To know more about each exchange, please read our full review which can be found when clicking the Quick Review+ button. Here you will find information on fees, payment methods, restrictions, regulations, our rating, withdrawal limits, account minimum, supported languages, supported fiat currencies, all order types, and much more. To learn more about how we rate the exchanges we review please adhere to our review and rating methodology page. If you are a US-based trader we recommend that you read our US guide.

7 Best Crypto Margin Trading Exchanges Reviewed

  1. BitYard – Best overall (Accepts US traders)
  2. BitMart – For altcoin traders
  3. FTX.US – For advanced trading
  4. CEX.IO – For beginners
  5. Bit.com – Futures & Options contracts
  6. StormGain – 0% fees
  7. ByBit – Best for risk management

Below is a comparison table of our top picks when it comes to exchanges that offer to trade with borrowed funds. In our list, four of the exchanges offer a demo trading option that will let you paper trade on the platform risk-free in a simulated environment. We have listed regulated exchanges at the top of the list and the non-regulated options at the bottom. All platforms have been had a full written review by our crypto team, make sure you read the full review before you continue. Use the table to find the perfect platform for you.

Regulation
Rating
Best for
Trading Fee
Minimum Account
Our rating:
4.22/5
Excellent
Regulated by
FinCEN, ACRA, MEAC
0.10%
10$
All Traders
Quick Review
  • Established 2019 Singapore
  • Type Cryptocurrency Exchange
  • Currencies USD, CNY, VND, EUR, HKD, JPY, IDR, KRW, RUB, BRL, THB, GBP, PHP, SGD, INR…
  • Funding Visa, Mastercard, Bank transfer, PayId, Osko, SEPA, Sofort, Klarna, Interac
  • Languages Mandarin (Chinese), Russian, Vietnamese, Korean, Japanese, Portuguese, Indonesian (Bahasa Indonesia)
  • Restricted countries China, Korea, Democratic People”s Republic of, Pakistan
  • Products Cryptocurrency, Derivatives, Forex
  • Trading platforms Mobile App Android + Mac, Webtrader, Own trading platform Windows
  • Devices Smartphone, Desktop, Web, Tablet
  • Max leverage 400
  • Order types MO – Market Order, LO – Limit Order, TO –
  • Support Email, Live Chat
  • Copy Trading
  • Welcome Bonus
  • Leverage Trading
  • Buy Cryptocurrency
  • High Security
  • Quick Registration
Pros

• Very intuitive copy trading platform
• A regulated digital asset platform that offers leverage trading
• Available in the US

Cons

• No contact phone number
• Lacking a good news source
• Missing cold storage wallet

Our rating:
4.21/5
Excellent
Regulated by
FinCEN
0.25%
10$
All Traders
Quick Review
  • Established 2017 United States
  • Type Cryptocurrency Exchange
  • Currencies USD, EUR, CAD
  • Funding Visa, Mastercard, Apple Pay, Cryptocurrency, PayPal, Bank transfer, Gift Card
  • Languages English
  • Restricted countries Afghanistan, Belarus, China, Cuba, Congo, Iran, Islamic Republic of, Iraq
  • Products Cryptocurrency, Futures, ICO
  • Trading platforms Tradingview, Own trading platform Windows + Mac, Mobile App Android
  • Devices Web, Smartphone, Tablet, Desktop
  • Max leverage 125
  • Order types MO – Market Order, LO – Limit Order, PO –
  • Support Live Chat, Email
  • Advanced Trading Platform
  • High Security
  • Earn Cryptocurrency
  • OTC Market
  • Staking
  • Buy Cryptocurrency
Pros

• Advanced interface for active crypto-traders
• Offers great OTC solutions
• Regulated in the USA by FinCEN

Cons

• Relatively new platform
• Not very beginner-friendly
• The website is lacking a market news source

Our rating:
4.19/5
Excellent
Regulated by
FinCEN
0.10%
1$
Day Traders
Quick Review
  • Established 2018 United States
  • Type Cryptocurrency Exchange
  • Currencies USD, EUR, GBP, AUD, CAD, SGD, HKD, TRY, ZAR, CHF, ILS, PHP, RUB
  • Funding Bank transfer, Visa, Mastercard, ACH, Cryptocurrency, Silvergate Exchange Network(SEN)
  • Languages English, Korean, Japanese, German, French, Dutch, Turkish, Vietnamese, Portuguese, Russian
  • Restricted countries Cuba, Syrian Arab Republic, Korea, Democratic People”s Republic of, Sudan
  • Products Cryptocurrency
  • Trading platforms Webtrader, Tradingview, Mobile App Android + Mac, Own trading platform
  • Devices Smartphone, Desktop, Web, Tablet
  • Max leverage 10
  • Order types SLL – Stop Loss Limit, SM – Stop Market, TSL
  • Support Email, Contact Form
  • Advanced Trading Platform
  • Leverage Trading
  • Real Stop Loss
  • Customisable Interface
  • Trading App
  • High Security
Pros

• Available in over 13 different languages
• Trade crypto with leverage in the US
• Low fees and market-making rebates

Cons

• No live chat
• Relatively new platform
• No demo account is available

Our rating:
4.08/5
Excellent
Regulated by
FinCEN, FINTRAC, GFSC
0.25%
20$
All Traders
Quick Review
  • Established 2013 United Kingdom
  • Type Cryptocurrency Exchange
  • Currencies USD, EUR, GBP, RUB
  • Funding Visa, Mastercard, SWIFT, Faster Payment System (FPS), SEPA, QIWI, Skrill
  • Languages English, Russian, Mandarin (Chinese), Italian, Portuguese, Spanish
  • Restricted countries Afghanistan, Bosnia and Herzegovina, Burundi, Central African Republic, Cuba, Korea
  • Products Cryptocurrency, Forex, Stocks, Metals
  • Trading platforms Webtrader, Own trading platform Windows + Mac, Tradingview
  • Devices Desktop, Smartphone, Web, Tablet
  • Max leverage 100
  • Order types MO – Market Order, LO – Limit Order, SL –
  • Support Phone Number, Live Chat
  • Buy Cryptocurrency
  • Veteran Trading Platform
  • Fiat Account
  • Beginner Friendly
  • Margin Trading
  • Staking
Pros

• Very easy to use for beginner crypto investors and traders
• Regulated cryptocurrency exchange for extra security and trustworthiness
• CEX.IO is a veteran exchange that has been live since 2013

Cons

• Very poor trading interface for day traders and scalpers
• Low-quality customer support
• Few fiat currencies accepted

Our rating:
3.91/5
Trustworthy
Non-Regulated
0.03%
1$
All Traders
Quick Review
  • Established 2022 Singapore
  • Type Cryptocurrency Derivatives Exchange
  • Currencies
  • Funding Cryptocurrency
  • Languages English, Mandarin (Chinese)
  • Restricted countries Afghanistan, Cambodia, China, Korea, Democratic People”s Republic of, Lao People”s
  • Products Options, Cryptocurrency, Futures
  • Trading platforms Webtrader, Mobile App Android + Mac, Tradingview
  • Devices Desktop, Tablet, Smartphone, Web
  • Max leverage 50
  • Order types MO – Market Order, LO – Limit Order, TO –
  • Support Email, Contact Form
  • Advanced Trading Tools
  • Welcome Bonus
  • Risk Management
  • Margin Trading
  • Trading App
  • Security Of Funds
Pros

• Advanced trading tools for crypto options, futures, and spot market
• Instant answers from live chat with a human support agent
• All customers on Bit.com are backed up by an insurance fund

Cons

• Non-regulated cryptocurrency exchange
• The only deposit method at the moment is with cryptocurrency
• Bit.com is lacking educational material for beginner traders and investors

Our rating:
3.89/5
Trustworthy
Non-Regulated
0%
50$
Day Traders
Quick Review
  • Established 2019 Saint Vincent and the Grenadines
  • Type Cryptocurrency Exchange
  • Currencies USD, EUR, AUD, CHF, CZK, DKK, GBP, HUF, KRW, ILS, NOK, NZD, PLN, RUB, SEK…
  • Funding Mastercard, Visa, Maestro, Cryptocurrency
  • Languages English, German, Mandarin (Chinese), Spanish, Dutch, Italian, Polish, Portuguese, Russian
  • Restricted countries United States, United States Minor Outlying Islands, Japan, Afghanistan, Bosnia
  • Products Cryptocurrency, Futures, Indices, Options
  • Trading platforms Webtrader, Mobile App Android + Mac, Own trading platform Windows
  • Devices Desktop, Smartphone, Tablet, Web
  • Max leverage 300
  • Order types MO – Market Order, SL – Stop Loss, LO –
  • Support Phone Number, Email, Contact Form
  • $0 Trading Fee
  • Trading Signals
  • Deposit Bonus
  • Leverage Trading
  • Advanced Trading Platform
  • Mining
Pros

• Very favorable commission structure
• Free demo account to practice
• Very high interest in the staking program

Cons

• Non-regulated cryptocurrency exchange
• Relatively new exchange with no reputation
• Few altcoins available

Our rating:
3.84/5
Trustworthy
Non-Regulated
0.075%
30$
Day Traders
Quick Review
  • Established 2018 Virgin Islands, British
  • Type Cryptocurrency Exchange
  • Currencies AED, ARS, AUD, BDT, CAD, CHF, CLP, CNY, EUR, GBP, HKD, HUF, IDR, ILS, INR…
  • Funding Cryptocurrency, POLi, Apple Pay, PayId, B-pay, Visa, Mastercard, Post BillPay
  • Languages English, Russian, Mandarin (Chinese), Japanese, Spanish, Vietnamese
  • Restricted countries United States, United States Minor Outlying Islands, Canada, Singapore, Cuba
  • Products Cryptocurrency, Futures, Derivatives
  • Trading platforms Tradingview, Webtrader, Own trading platform Windows + Mac
  • Devices Desktop, Smartphone, Web, Tablet
  • Max leverage 100
  • Order types MO – Market Order, LO – Limit Order, C –
  • Support Email, Live Chat
  • Rebate
  • Trading App
  • Margin Trading
  • Welcome Bonus
  • Risk Management
  • Fast Execution Speed
Pros

• Very high quality trade interface
• Real stop loss and take profit orders
• Great live chat support, instant answers

Cons

• Non-regulated exchange
• This exchange is not for beginner traders
• Bybit does not offer a demo account

BitYard

bityard

Why we picked BitYard

Bityard is a Singapore-based crypto exchange that offers great tools and products for crypto margin trading. The exchange holds there different regulations in three different regions, FinCEN in the United States, ACRA in Singapore, and MEAC in Estonia. After cementing these three regulatory statutes, Bityard is seen as a trustworthy and high-security crypto platform for day traders who are interested in products with borrowed funds such as Futures and Perpetual Swaps.

We have chosen to add Bityard to our list due to its great trading interface, low fees, fast fiat on-ramp solutions, and beginner-friendly user interface. Another benefit of using the Bityard platform is the vast range of trading pairs for altcoins. Most legacy coins are listed and plenty of new coins have recently been released on the market with a lower market cap.

Margin ratios

The maximum margin ratio for digital assets on Bityard is 1:125. This means that you can trade with 125x your capital.

Margin trading fee

The margin fee for trading crypto on Bityard is 0.10%.

Tradable instruments

Here is a list of all tradable instruments that offer margin for crypto on Bityard:

  • Futures
  • Perpetual Swaps
  • Inverse perpetual Swaps

Pros and Cons

ProsCons
Lower than average fees for cryptocurrenciesLacks a news source for updates on all markets
High security due to triple government licensing
Very fast registration and verification process

BitMart

bitmart margin trading exchange

Why we picked BitMart

Bitmart is a crypto exchange in the United States and currently holds a license with FinCEN. The reason why we have added Bitmart to this list is due to the user-friendly interface, quick registration, low fees, and high security that the exchange offers. We think Bitmart is a great platform for beginners as well as seasoned investors who are looking for a stable and fast platform to use when trading altcoins with margin. Bitmart is more than just a place to trade cryptocurrencies with margin, it boasts an OTC desk, staking protocol, and a great fiat on-ramp.

Short-selling is also possible on Bitmart and many investors turn to this platform either when they are looking to hedge their positions through Futures contracts or when they want to take advantage of declining markets. The exchange has a great trading interface which includes a TradingView chart and all the necessary technical tools for chart-based investors. Overall, we think it’s a great pick, especially for beginners due to the seamless navigation.

Margin ratios

The maximum ratio on the Bitmart exchange is 1:125 for digital assets. This is equivalent to trading with 125 times more capital than you currently have in your account. The requirement for Bitmart is only 0.75%.

Margin trading fee

The fee for trading crypto on Bitmart is 0.25%.

Tradable instruments

Futures contracts are the only tradable instrument for margin on Bitmart.

Pros and Cons

ProsCons
Great for advanced day tradersOffers no live chat
Offers market-making rebatesOffers no demo account
Available in 13 different languages

FTX.US

ftx us home page

Why we picked FTX.US

FTX.US is a FinCEN-regulated crypto exchange with excellent trading features for advanced traders who are looking to level up their game with leverage and complex order types. The platform offers up to 1:10 leverage at 10% margin requirements and order types such as Immediate or Cancel, Take Profit Limit, Stop Loss Limit, and Post Only. FTX.US is available on both desktop and smartphones where most of the web application features are readily available.

FTX.US has a fiat account that lets you deposit your local currency instead of transferring your coins from other platforms. This makes things easy for you if you are new to crypto and want to get started directly without having to move digital assets from other exchanges. Except for these features, FTX.US has developed both lending and a staking mechanism where you can lend your coins or stake them for stable rewards.

Margin ratios

The margin ratio on FTX.US is 1% if you use the maximum 1:10 leverage which means that you only need to add 1% of the total position size as your margin capital. For example, if you add $100 you will be able to access an additional $900 to trade with.

Margin trading fee

While trading with increased buying power on FTX.US the fee is 0.10%.

Tradable instruments

Through FTX.US you can trade margin on these derivatives:

  • Futures
  • Options
  • Swaps

Pros and Cons

ProsCons
Fast matching engine for day tradersFTX.US has no live chat feature
Great for US tradersOffers no Demo Account
Offers market-making rebates

CEX.IO

cex.io

Why we picked CEX.IO

CEX.IO is a UK-based cryptocurrency exchange that has a broker site that offers margin ratios up to 1:100 leverage. The CEX.IO ecosystem is regulated by three different regulatory bodies including FinCEN, FINTRAC, and GFSC. CEX.IO as a company and platform is a trustworthy name in the cryptocurrency industry and this is one of the main reasons why we have chosen to feature the exchange here. We have total trust in the team behind CEX.IO and we know they always deliver on their promise of high-quality crypto trading.

CEX.IO has been on the market since 2013 and since then the exchange has had a clean track record and earned an outstanding reputation. The exchange lets you deposit fiat money to buy digital assets with fiat on-ramps such as bank cards, SEPA transfers, Skrill, and SWIFT. Regarding security, the whole ecosystem of CEX.IO is considered a top-quality branch and has gained a huge following since its inception. The platform offers its services in six different languages including English, Spanish, and Chinese.

Margin ratios

You can margin trade cryptocurrencies on CEX.IO with as little as a 1% margin requirement. This translates into 1:100 leverage where you only need to add 1% of your margin capital as an initial deposit.

Margin trading fee

The fee on CEX.IO is 0.25%.

Tradable instruments

On CEX.IO the only available margin instrument is the broker side of the platform.

Pros and Cons

ProsCons
Very user-friendlyCustomer support takes a long time to answer
High securityThe trading interface is out-dated
Great fiat payment solutions

Bit.com

bit.com

Why we picked Bit.com

Bit.com is one of the latest exchanges we have reviewed on Trading Browser and we are excited to promote this platform due to several reasons. First of all, the fee is outstandingly low at 0.03% which beats many competitors and this alone is a great reason to use the platform. Second, the platform offers both Options and Futures contracts which gives a lot of flexibility for any trader trying to control his risk. The Bit.com exchange is located in Singapore and is backed up by a team of real professionals. From what we can see, Singapore has got a growing number of good crypto exchanges and Bit.com is one of the latest releases.

Bit.com has low entry barriers with a minimum account limit of only $1. This means that all beginners can start small and if you only want to test the platform with a smaller stake that works too. The exchange also has a favorable welcome bonus for first-time users and it can be accessed from both desktop and app.

Margin ratios

The maximum ratio on Bit.com is 2% (1:50) which means that you can leverage up your positions 50 times.

Margin trading fee

The fee of 0.03% is one of the lowest we have seen so far on the market.

Tradable instruments

Below is a list of all products that offer increased buying power on Bit.com:

  • Futures
  • Options

Pros and Cons

ProsCons
Advanced futures and options contractsNon-regulated
Very fast response time through live chatFew deposit methods
Your funds are backed up by an insurance fund

StormGain

stormgain

Why we picked StormGain

StormGain is one of those platforms that offer 0% trading fees, even with borrowed money. This is a big benefit for investors who are looking to increase their position size with extra margin and I can see why they have become so popular. StormGain is not only about low fees, the reason why we have added it to this list is due to great features such as trading signals, Bitcoin mining, and a lucrative deposit bonus. StormGain is currently unregulated but after reviewing what the traders say about the platform we can only find good reviews.

The trading interface of StormGain is of the highest standard and I know for a fact that this exchange is full of active day traders who use the signals daily to profit from market moves. StormGain has included fiat gateways through bank cards to make the on-ramp easier for first-time users.

Margin ratios

StormGain has the highest margin ratio of 0.3% or 1:300 leverage.

Margin trading fee

The current trading fee is 0% for all traders on the platform.

Tradable instruments

There are two tradable instruments on StormGain where you can add extra buying power:

  • Futures
  • Options

Pros and Cons

ProsCons
Lowest fees on the marketNon-regulated platform
Demo practice accountFew altcoins listed
Favorable staking program

ByBit

bybit

Why we picked ByBit

ByBit is becoming somewhat of a veteran on the crypto scene now after years of proving high-quality cryptocurrency trading. The exchange has a wonderful user interface that every beginner will understand from day one which is important when it comes to leveraged products. ByBit employs great risk management tools for all traders and one of these tools is called Mutual Insurance. This tool works almost like insurance for your funds and it can help you get out of a tricky situation if you lost control of your position.

ByBit is a derivatives crypto exchange and it only makes sense that they will offer great products where traders can borrow money to increase their trading results. Why we like ByBit so much is due to the responsibility they take for their traders, especially new beginners. ByBit has also been featured in another guide for having one of the easiest stop-loss orders to execute.

Margin ratios

The maximum ratio on ByBit is 1% or 1:100 leverage.

Margin trading fee

The active exchange fee on ByBit is 0.075%.

Tradable instruments

All leverage-bearing products on ByBit are:

  • Futures
  • Perpetuals

Pros and Cons

ProsCons
Very low exchange feesNon-regulated
Fantastic risk management tools
Fast live chat support

What is a Crypto Margin Trading Exchange?

A crypto margin trading exchange is a digital asset trading platform that allows investors to access borrowed funds by depositing an initial margin balance. This margin balance is then multiplied to increase the buying power of the investor. This extra buying power can be used to buy or trade cryptocurrencies such as Bitcoin, XRP, and BNB. While investing on a margin exchange the reward and the risk are amplified meaning that you stand to make much larger gains as well as losses.

These cryptocurrency platforms are promoted in almost all regions of the world and are equipped with certain contracts such as swaps, perpetual swaps, inverse swaps, futures, and other derivatives that give access to leverage. Leverage is the borrowed funds you receive from the operator after depositing your initial margin balance. When you trade these borrowed funds you can increase your position size up to x100 times.

what is

When you open a position with margin the platform takes into consideration your initial margin balance plus the added leverage you have chosen to use. For example, if you deposited $500 and use a margin ratio of 10% you will open a position size of $5000 since there is a x10 leverage to the position.

Key takeaways:

  • Margin trading crypto exchanges offer leverage through borrowed funds.
  • You need to deposit an initial margin balance to trade.
  • Your profits and losses are amplified with increased buying power

How do crypto margin trading exchanges work?

The way these platforms work is that you are allowed to trade with less margin and increase the position size of your investment by borrowing money from the operator. Here is how it works. First, you need to deposit an initial balance called the margin capital. From here, you select the level of leverage you want to trade with, for example, 1:10, 1:25, or 1:100. This leverage is the multiplier of your position size and will increase the open positions by 10x, 25x, or 100x depending on how much leverage you choose. When your trade is active you will be making gains or losses on your full position size which includes your initial balance and the added leverage funds. This is why trading with borrowed funds can sometimes be so profitable but also risky. Let’s take a look at what a real-world example would look like.

In our example, we are going to use Joe as our trader. Joe has deposited $800 in his trading account with BitYard and is going to use a ratio of 10% to open a position. A ratio of 10% means that out of the full position size, Joe will only put 10% of his own money. The calculation is simple, we take his $800 and multiply it by 10 to find out the full position size. In this example, it turns out to be $8000. Out of this $8000 Joe’s balance is $800, or 10% of the full position size. Did you see how the relationship between balance and ratio worked out?

Now, Joe wants to use an even smaller ratio of 2% which means that he wants to open a bigger position with his $800. At a 2% ratio, he will be using a leverage ratio of 1:50, meaning that he will open a position size 50 times bigger than his current account balance. The calculation i simple, $800 x 50 = $40.000. Out of these $40.000, Joe’s initial balance only adds up to 2% of the full position size meaning he is trading with a ratio of 2%. The rest of the funds are coming from the crypto exchange he is using which is in this case BitYard. The exchange simply adds the extra funds to the position size and when the position is closed out the leveraged funds are retrieved.

pros and cons

Pros and Cons of margin trading on crypto exchanges

Below is a table of the benefits and drawbacks of trading with margin on a crypto exchange.

ProsCons
Allows the trader to access more capitalFees are increased with increased buying power
Greatly increased profitsLosses mount up faster
Smaller accounts can trade biggerDifficult for inexperienced investors to understand
Adds flexibility to trade several markets with size
Advanced traders benefit from more capital

What other traders ask

The exchanges that offer margin products to their traders and investors are usually derivatives exchanges of some sort. Some well-known exchanges that offer margin are BitYard, BitMart, FTX.US, and also some less popular platforms are Bit.com and StormGain.

The way you trade follows the same principles with one small exception. Before you enter your positions you are asked to choose your leverage ratio. This is usually a bar from 1-100 where you can decide how much leverage you want to trade with. When you have selected the correct ratio for you it’s time to open a position. This is done the same way as with any other spot market position through the order selection field.

Yes, it is possible, however, it is a little bit more complicated than in other jurisdictions. Not all platforms in the United States offer derivatives products and for an exchange to do it legally, it has to be regulated. BitMart and FTX.US are two great examples of US platforms that allow digital asset traders to borrow funds when trading.

This percentage stands for how much of your capital you need to put down to open a position. For example, if you trade with a ratio of 5% you need to add 5% of your risk capital to enter the position. Very basic but many traders confuse this concept of ratios. The smaller the ratio is the less capital you are asked to add to the position and the more leverage is being provided by the operator.

Yes, they do. A maximum ratio of 33%, or 3x leverage is available on Coinbase.

The most significant risk is the loss of one’s capital. When trading on margin, the swings up and down in your account happens a lot faster due to the increased buying power and this is how unexpected losses can occur very fast for a beginner. Most new traders underestimate the power of leverage and they usually take on too much risk too fast without knowing how to handle it. At a ratio of 20%, or 5x leverage, your liquidation level is set 20% below the opening price. A 20% price swing can happen during a few hours in cryptocurrencies and will wipe you out and liquidate your position, which is the biggest risk to your account. Another significant risk is the risk of increased trading fees. When trading with added buying power your fees are enlarged as well.

It is possible to lose all your capital in your funded trading account. Since your initial deposit acts as risk capital, it is always these funds that are lost first when the market goes against you. It only takes one bad position for your whole investment account to be wiped out. To avoid this situation, always employ correct risk management and the use of a stop-loss order to protect your downside.

Crypto margin trading ratios explained

Ratios can be difficult to understand for beginners so I will try to keep things as simple as possible. Ratios explain how much of your capital is needed to open a position on an exchange. For example, if there is a 5% ratio, you are asked to put 5% of your investment capital into each position and the rest of the funds will come from the operator. A 5% ratio means that you will trade with 20 times as much capital as you currently have in your account. This is a very risky position size for new traders whereas experienced traders can use this ratio to their advantage. If you were to trade with a 1% ratio your position sizes would be amplified 100 times of your account balance and you will only have to put down 1% of this capital as risk. Below is a table where I’ve included some of the most popular ratios in combination with your position size and the required capital from you.

Ratios50% (1:2)25% (1:4)10% (1:10)5% (1:20)2% (1:50)1% (1:100)
Position size
$200$100$50$20$10$4$2
$800$400$200$80$40$16$8
$2500$1250$625$250$125$50$25
$7500$3750$1875$750$375$150$75
$12.000$6000$3000$1200$600$240$120

It’s visible that a higher ratio lets you trade with less capital. A higher ratio also lets you use more capital. You can choose whether to use a higher ratio to access more capital and trade bigger or to use less of your funds. This is something that professional traders constantly use to minimize risk. Think about it, the less capital of your means less risk on the table.

What are the products offered

A wide range of products have been released to the cryptocurrency community and some of them are better than others to use I will explain why. Some of these products are aimed at retail investors while others are more suitable for professional traders.

The differences between them are not so big but they make a huge difference should you make a mistake when trading these contracts, after all, there is a lot of money involved and yours are always lost first. Some contracts are riskier than others and I will segment these contracts into Risky and Less Risky depending on the functionality. Below is a list of the most popular contracts for margin trading in the crypto space:

  1. Futures
  2. Perpetual Swaps
  3. Inverse Perpetuals
  4. Options
  5. CFD
  6. ETF

products

Now, how do I determine how risky a contract is, after all, they are just connected to a market. It’s not that easy. Some of these contracts expire and have a physical settlement that you need to avoid unless you want physical delivery of the underlying asset. Others have outrageous overnight fees and some can even put you in debt with the broker if your losses mount up to much.

Risky

  • Futures
  • CFD

These three contracts are inherently more risky for a beginner only due to the functionality of how they work and operate. The futures contract is an agreement between you and a seller to exchange contracts at a future date. Sometimes this comes with a physical settlement date where the underlying asset is delivered to all traders who are holding buy contracts, so watch out for that. The CFD contract can be very risky if the broker does not operate with negative balance protection. Negative balance protection is a risk management tool that prevents your account balance from going below 0. If the broker you trade with doesn’t have this tool incorporated you can lose more money than you currently have and go into debt with the broker.

Less Risky

  • Perpetual Swaps
  • Inverse Perpetuals
  • Options
  • ETF

While all of these contracts are leverage-bearing contracts they are less risky in how they work and function. They are all derivatives products and mirror the price of an underlying asset which means that when you buy these contracts you never own the underlying security. Perpetual contracts act like Futures contracts but with one big difference, there is no expiration date. Options have an expiration date but they have a set premium you pay which you agree upon when the option runs out and there is no physical delivery, you will just win or lose your premium which means that your risk is controlled. ETFs generally have lower ratios of leverage and work similarly to buying a stock.

Fees and commission while using margin with examples

The fees and commissions of trading with margin on exchanges do not change due to the added leverage, however, with increased position sizes comes increased fees. There is a big misconception about how fees work on these platforms and I will try to explain how they really work. I will use a table to show you that all you need to think about when opening a position is the full position size. The fees are always calculated on your full position size whether it is $200 or $20.000. It is very important that you seek out the active trading fee of the broker or exchange before you get started, this way you can actually calculate what you will pay beforehand, and if you are not happy with the commission you can simply swap broker or lower the ratios. Below are two examples of fees at different commission rates, margin ratios, and different position sizes. The red numbers are the fees you would pay to open a position with the full account size at different ratios.

Example 1

In this example, we are going to assume a fee of 0.10%.

Ratios50% (1:2)25% (1:4)10% (1:10)5% (1:20)1% (1:100)
Account size
$200$0.40$0.80$2$4$20
$1000$2$4$10$20$100
$2500$5$10$25$50$250
$5000$10$20$50$100$500

Example 2

In this example, we are going to assume a fee of 0.50%.

Ratios50% (1:2)25% (1:4)10% (1:10)5% (1:20)1% (1:100)
Account size
$200$2$4$10$20$100
$1000$10$20$50$100$500
$2500$25$50$125$250$1250
$5000$50$100$250$500$2500

When looking at these tables it becomes obvious how important it is to seek a platform with fees that are as low as possible. For example, if you were to open a position with a $1000 account at a 5% margin of 0.10% you would have to pay a $20 fee, and if you would open the same position with a 0.50% fee you would have to pay $100 which translates into 10% of your total account. So, when looking for a broker or exchange, keep these numbers in mind and try to go even lower than 0.10% if possible.

What are the risks of margin trading on crypto exchanges

There are three common risks that beginners should watch out for when trading these types of contracts. It is very easy to get sucked in while thinking of glorious profits and how fast you can make a big buck but in reality, this is very difficult. Most retail traders try to maximize the leverage to make money faster but what usually happens is the three risks I have listed below.

Unexpected losses

Most people will tell you that your losses can increase and that you can lose your whole account balance. While this is true for any type of investing it is more the unexpected factor that makes it so dangerous, especially at high ratios. The crypto market swings up and down very fast in a high-volatility fashion and with added leverage, the calculation becomes a little bit of a horror scenario. When you open a position and the market moves against you a few ticks it will feel like that whole market is turning on you as losses mount up very quickly. No matter if you are trading with a small account, the losses are generated very fast, and you can go from having $500 to losing $450 in a matter of seconds. This is in my opinion the most dangerous aspect of this style of trading and I think retail traders should be aware of this. Start out small and test the market before you increase, that’s my best tip.

Margin call

A margin call happens after the unexpected losses and this is when you are in a really bad situation. It means that you are running out of margin balance to cover for your position and if you take on more losses your account will be wiped out. When reaching this type of warning message, it is better to cut your losses and start over, meeting a margin call with more capital is never a good option, you will just through more wood in the fire. Since the market moved against you for the first time you are clearly not in sync with how the market is moving and you should reassess your analysis and start over. From here, you could lower the ratios and recap what went wrong but never meet a warning by adding more funds.

Liquidation

Now, if you got the margin call and you didn’t close the position or added more funds and the market keeps going against you, your broker will be forced to close out the position and liquidate your account. This means that all your funds are lost and there is no way to retrieve them. This happens after your last warning and you decide to not act on time. To prevent either of these situations to occur I recommend that you use proper risk management tools. The best way to control your risk is to choose the proper leverage ratio and to use a protective stop-loss order.

Final thoughts

Is margin trading for everyone? No, I don’t think so. It takes nerves to handle increased buying power when the market swings up and down. Your account will move more than usual and it’s going to get rough. However, if you decide to start out with this type of investing and you are already an experienced trader you stand to make some significant gains. In my years trading the markets I’ve had my best profits while investing on margin.

If you are interested in starting out I recommend that you read this article from top to bottom to get an idea of how things work in regards to the platforms, products, fees, risks, and benefits. After all, it’s your money we are talking about and you should always make informed decisions when investing in the markets. If you follow good practices, choose a reputable platform, and stick to sound risk management you can make a good living from this type of trading. But remember to stay on your toes because the market gets even more unpredictable with added buying power.