Pros of Margin Trading for Crypto
Maximize profits
With margin trading, you can enter the market with a bigger position, which means bigger gains on successful trades as compared to using just your existing funds. Assuming that your margin trade is successful, high leverage ratios can help you maximize your returns.
Convenience in trading
Margin trading allows you to enter positions quickly without depositing more funds to acquire the same position size. This also allows you to save time and act quickly if you are timing the market.
Portfolio diversification tool
With borrowed funds from margin trading, traders can open multiple positions with relatively smaller amounts of capital without compromising position size. This allows traders to diversify and hedge, reducing the risk of large losses by preventing traders from putting all their proverbial eggs in the same basket.
Con of Margin Trading for Crypto
High Risk
High returns are usually accompanied by high risks, and this is true for margin trading as well. While returns are potentially amplified, potential losses are also multiplied if the tide is not in your favor. With leverage trading, losses can be very damaging for your portfolio as your market exposure is increased. Unlike regular trading, margin trading could result in losses that exceed your initial investmentโeven a small drop in the market price can be amplified and cause significant losses.