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Recently I've been asked by many people what margin trading is and how to do it. And I've decided that it will be more efficient to make a post. So that anyone who is willing to do some reading can start using this tool. First of all I picked Poloniex because it has more users daily. Personally I prefer Bitfinex, but it doesn't really matter. You can make same amount of profits on any of them. It's all about whom you trust more and who has the better reputation.
Trading on Poloniex is easy enough so I will assume that you already have some money on the exchange and know how to trade. Transfer happens instantly so you don't have to worry about sending money to the wrong account accidentally.
You can always reverse your actions. You can use any cryptocurrency that is in the table below, as your collateral. The value of your collateral will always be tied to the current price in Bitcoin. These are the cryptocurrencies that currently support margin trading. You will see this when you enter Margin Trading section. Before you start doing any trades you will have to research what is that you want to trade. And are you opening a short or long position.
I personally mostly use margin trading to open short positions and barely ever open any long positions. For this you will have to find a token that is overvalued at the moment and you think that price of it is going to fall. You will make your profits as the price is falling. Bigger the fall — bigger the profits. For example, I think the Ethereum has grown enough after the recent downfall and I decide that I want to open short position.
I go to sell Ethereum in the Margin Trading section. I know it sounds complicated, but I assure it's not. What is actually happening when you do this? You take a loan with as much Ethereum as you sold and you actually sell it.
And when you close your position you buy the same amount Ethereum and return to the lender with interest. But you don't have to worry about any of this, because it is all automated and you just have to open and close your position. When we sold Ethereum we opened our short position. The price of Ethereum has dropped and I want to take my profits now. How do we close it now? This box appears as soon as you opened any position long or short.
And all you have to do, is close it to take your profits. You are going to need a cryptocurrency that is expected grow. More price goes up — bigger the profits. Let's continue working with the same Ethereum example. But instead of selling we are gonna buy Ethereum. That way we open our long position in margin trading. You also take a loan only this time it's not Ethereum that you are loaning but Bitcoin.
And when you close your position, you sell Ethereum that you bought and return the Bitcoin loan to the lender. But keep in mind whether you are placing short or long position, don't use maximum avaliable funds in your Margin Trading account. Because your predictions won't always be spot on and instead of expected price drop it can suddenly start rising. Or the price of currency that you used as colleteral is significantly droping. You can follow the numbers in this box.
Also I have to mention the loan rate of Bitcoin is much higher than any other cryptocurrency. This can be hundreds and even thousands of percent difference. For this reason short positions are used much more and brings more profits. You can check the rates for individual currencies in the Lending section.
If you are enjoying my content! Don't forget to upvote, resteem, comment and follow me eviljedi. Question, say I take a short position on a coin, and I want to close my position once I get x amount of profit.
I haven't tried these things on Polo. But I would think that placing buy order would just open long position and wouldn't close your short. And if there wouldn't be enough collateral left, you couldn't even open another position. Anyway better to test out with small amount of coins.
Just wanted to share that for anyone wanting to try this, don't deposit your SBD into polo just yet. They're still having issues with their wallet. My deposit from earlier today is still missing. You can just buy Ethereum if you think that it is going to go up.
And use it as a collateral to sell Ripple short position in margin trading. If your both predictions are right, you will make more profit than just making single Ethereum trade.
More tools, more profit! I did some lending on Polo in the past, but to be honest, margin trading on thinly-traded cryptos scares me way too much. One whale dump and you're out of there! That is why suggested short positions for margin trading. It is much more safe if you plan your moves intelligently. Thank you for all the info. But I won't touch polonex , I do not trust them. Poloniex is not the only. Find the one that suits you. You can apply the same technique explained here on any of them.
Nice post - clearer than many on this specific topic. I've been using margin on Polo for about a year and I have yet to understand how stop-limits work with margin. Other exchanges implement this in a much more straight-forward way. Can you provide any guidance? Intro Recently I've been asked by many people what margin trading is and how to do it. Opening short position I personally mostly use margin trading to open short positions and barely ever open any long positions.
Opening long position You are going to need a cryptocurrency that is expected grow. Thanks for reading my post. I hope that you liked it and it was somewhat useful to you! Authors get paid when people like you upvote their post. Thanks for sharing and margin trading can be a great way to grow the account if done right. Very interesting, thanks for the info! Hope you found it useful! How do you use stop loss on Poloniex?? Hi, thanks, the post is missing the sell.