Margin trading refers to the practice of using borrowed funds from a broker to trade a financial asset (in this case cryptocurrencies), which forms the collateral for the loan from the broker. A margin account differs from the regular cash account used by most investors because the short sales with leverage can only be made in margin accounts. Traders can go short with cryptocurrencies by using a cryptocurrency margin trading platform. This is a very risky method that requires lots of experience and knowledge because margin trading can generate much larger losses than traditional trading. Short term traders should always use “stop-loss” and “take profit” orders when they are opening their positions (the risk is extremely high). Margin refers to the amount of funds that the trader or investor must personally put up from his or her own resources. For example, a 20:1 leverage ratio means that the minimum margin requirement for the trader is 1/20 = 5%. This means that the trader is required to have at least 1/20 = 5% of the total amount of trade available as cash in the trading account. In this case, to trade $10,000 of cryptocurrency, with a margin of 5%, the trader will only have to deposit $500 into his margin account. The leverage in the trade like this is 20:1. It’s not a good idea to hold a short position for long periods of time or to leave an open short position with no stop-loss order. I would recommend everybody to use risk management techniques to limit losses for this type of trading with cryptocurrencies. The ability to earn big profits by using a margin trading is substantial but losses can also be very big and traders should always have this in mind.
Brokers that allow margin trading and have a free demo account
Before starting to trade with margin traders should find the profitable trading strategy with short and long-term goals. Brokers usually offer a free demo account that allows a trader to experiment with trading style, to learn a profitable system and get used to the broker’s execution methods and platform. It is a very important to find the right broker that offer margin trading and have great liquidity. There are only a handful of brokers that allow margin trading and have a free demo account. When we talking about leverage comparison of brokers, some brokers offer a wide range of digital coins with up to 50:1 leverage but most of them offer leverage from 3:1 to 30:1. IQ Option offers up to x5 leverage for Crypto trading and provides all its members with the tools they need to progress. IQ Option also offers a free demo account and this broker dedicates a huge amount of attention for the beginner traders in a simple and transparent way. Traders can trade cryptocurrencies with up to 5:1 leverage on Plus500 trading platform. AvaTrade is offering a wide range of digital coins with up to 20:1 leverage and zero commission. Avatrade demo account is available free of charge, you can open a free practice trading account with any amount you want.
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