Coin-Margined Trading Definition
Coin-margined trading is a trading procedure in cryptocurrency markets where the investor uses a digital currency as collateral. It signifies a form of futures contract where both the margin used to open and manage a position, and the settlement of the position, are processed using a specific cryptocurrency.
Coin-Margined Trading Key Points
- Coin-Margined Trading allows traders to use a specific cryptocurrency as the margin for their trades.
- This process eliminates the need to convert from cryptocurrency to fiat currency to maintain margin levels.
- It is a commonly used trading procedure in the field of cryptocurrencies.
What is Coin-Margined Trading?
In the cryptocurrency markets, coin-margined trading is a popular choice of trading style. It allows the trader to use their existing portfolio of cryptocurrency in order to open and manage trading positions. This practice is common in the world of futures trading where cryptocurrency is used as the primary form of collateral.
Why use Coin-Margined Trading?
Coin-margined trading provides an avenue for traders to fully utilise their cryptocurrency assets. Instead of having to convert cryptocurrency into fiat currency to meet margin requirements, traders can keep their assets in their original form. This not only maximises trading efficiency, but also hedging possibilities, because the value of the margin changes in correlation with the market.
When to use Coin-Margined Trading?
Coin-margined trading is typically used within futures trading. It is best suited to those traders who have a strong grasp of the cryptocurrency market and are capable of effectively managing their portfolio in a highly volatile market.
Where to use Coin-Margined Trading?
Traders can typically engage in coin-margined trading on any cryptocurrency exchange that supports futures trading. It is crucial, however, to understand the specific rules and regulations of the platform in question as these can vary.
Who can use Coin-Margined Trading?
Any crypto traders or investors can use coin-margined trading but it’s typically beneficial for those who have enough understanding of the cryptocurrency market. It is not recommended for beginners due to its complex nature and risk of loss during high periods of volatility.
How to do Coin-Margined Trading?
Before using coin-margined trading, a trader must have enough cryptocurrency to be used as collateral. After the trading position is opened, it’s important to manage it effectively, ensuring that the margin level stays above a certain threshold to avoid liquidation. The trades are then settled in the form of the cryptocurrency being used.
