The purpose of any trade is to extract margin. Margin trading is a type of asset purchase and sale.
What is margin trading ?
Trading operations that are provided on credit or secured. Strictly according to the previously specified amount-margin. The main difference from a conventional loan is that the amount that will be received in the end will exceed the collateral by a lot. The purpose of margin trading is to get a price difference for the same product. However, this will happen after some time.
The principle of operation
Margin trading is only closed transactions. In other words, when a person has bought a product for a currency, then later it will be necessary to sell it for the same currency. This method is very popular among cryptocurrency users. Usually use not only money as such, but also various goods.
The advantage of such a loan is that it does not require special manipulations. Special permissions or confirmations. Also, during the trading session, such a loan is issued absolutely free of charge. If you take a loan for a limit of more than a day, then most likely you will need to provide a reward.
Types of margin trading
There are only two types. Long and long position. A long one implies a calculation for the growth of quotations. In this case, it is better to buy shares at low prices, and as they increase, sell them.
In the second case, the main advantage is to make money on falling prices. For example, you buy stocks that you think are overpriced. You borrow them from a broker, he in turn sells them on the market. After that, you need to wait for the moment when they fall again. After all the manipulations, the shares will return to the broker, and you will earn on the difference.
Margin trading will allow you to earn more on scale. There are no additional conditions and obligations. The only obligation is margin. If the transaction is unprofitable for the broker, he cannot provide any claims or demand compensation. One of the big advantages is the possible profit even during the fall of the cryptocurrency exchange rate. The broker will not remain in the loser either. There is a big plus in the fact that the user performs operations on a sufficiently large volume. Subsequently, this increases the commission, and hence the broker’s profit.
Like all cryptocurrency trading, margin mining is a risky activity. There is absolutely no guarantee that when you need it, the price will go up. And especially since after the purchase it will become cheaper. Otherwise, you will have more losses than income.