Based on Crypto Coin Junky Materials
Let’s get you started making some of that BitMEX “short trade with 100X leverage” money you’ve heard so many people talking about (btw, never do that…and if you do, you’re an idiot).
Whether you love them or hate them, BitMEX has the potential to take you from zero to hero faster than any other trading method out there. This is potentially the biggest draw to the BitMEX trading platform.
How to Get Started Trading on BitMEX
I highly recommend you open up your BitMEX trading account by using the link here in order to register. You receive a 10% discount on all your transaction fees for the first six months at no additional cost to you.
BitMEX Margin Trading In Plain English
I’ll start off by defining a few terms that you’ll need to be familiar with in your early stages ….
Margin trading — this is the method of conducting a purchase using cash that is provided to you (the trader) as a loan. In reality, you’re not really “borrowing funds” from any centralized entity, you’re merely swapping out “contracts” with others utilizing the platform.
If you’re shorting, you’re swapping out with someone going long. If you’re going long, you’re swapping out with someone that is shorting.
That’s the gist behind it all. For the sake of this guide, I’ll loosely use the term borrowing.
Leverage — the amount of funds that you decide to borrow. The higher the leverage, the more funds you borrow, and the more risk you take at getting liquidated.
Example: $1,000 with 5X leverage = $5,000 your trading with. Your liquidation price is given to you before and during your transaction, so you should never be surprised at where it’s at.
Liquidation price — this is the price at which your account balance (or amounts of funds you’re using) is completely wiped out.
Example: $100 with 25% leverage at BTC entry price of $7,500 = $6,002 liquidation price.
Don’t worry about calculating all this stuff by yourself. BitMEX was nice enough to provide you with a calculator. You’ll never be left in the dark when it comes to your profit, loss, or liquidation price.
Long position — betting that price movement will increase.
Short position — betting that price movement will decrease.
Limit order — (aka market maker) set a price and have it filled once the market reaches your set price. 9 times out of 10, you should be using this for all your trades to prevent paying high fees.
Market order — (making you the market taker) this is where you’ll immediately exit your trade. For having this convenience, you pay 3X the fee (%0.0075 as opposed to %0.0025).
Take Profit — like the name implies, this is where you start taking profits as the price value increases. The opposite applies for shorts. You want to start taking profit below your entry price.
Stop Loss Limit — this is to prevent you from completely losing all your capital from a sudden drop (for longs) or sudden spike (for shorts) in price action. Once a stop loss trigger has been reached your trade initiates your stop loss limit price. Once this limit price has been reached, you’re exited out of the trade. This will ensure that your loss is minimized.
Stop Loss Market — the same as stop loss limit, however your trade will be “immediately exited” at the market price. I highly recommend using this over the stop limit when you’re not close to your computer (or on any occasion for that matter).
When price drops, it drops fast. There’s a good chance that your stop limit price will not activate and you’ll be left holding the bags (debt). Using the stop loss market, ensures you that during a strong dip, you keep your losses to a minimum. You’re guaranteed an exit out of the trade, which again, is not always likely with stop loss limits.
Trailing Stop — think of this as a “moving stop loss” that follows the current price by a set value.
Example: $1,000 at BTC entry price of $6,500 with a trailing stop loss of $250 would mean that if the price action decreases to $6,250, you would be stopped out (exit the trade).
However, if your price increases to $7,000 and then drops $250, it would be stopped out at $6,750. This is a great feature to use when you are trade is already in profit. Trailing stops will ensure that you take advantage of quick spikes in price if you’re not by your computer.
BitMEX not only allows you to trade with borrowed money but enables you to make a profit on both an uptrend or downtrend. No longer will you be confined to bull markets once your familiar with this trading platform. Hell, you might actually look forward to bear markets. You can make just as much during these periods of margin trading than you can within bull markets, if you play your cards right.
Now let’s look at the various ways to leverage your trades on BitMEX …
Leverage Trading on BitMEX
The cryptocurrency exchange allows you to create anonymous accounts without giving your real name or information. In order to start trading on BitMEX, all you really need to do it is deposit Bitcoin on your account. No other currency is accepted as a deposit, so don’t send you’re Ethereum, Litecoin, Ripple, or any other altcoin for that matter. Deposits are fairly quick, but this is highly dependent upon how busy Bitcoin miners are. I typically receive my deposited funds within 15 to 30 minutes.
Be aware that BitMEX doesn’t actually trade in Bitcoin, it trades in contracts. Contracts are an agreement to buy or sell an asset (in this instance cryptocurrency) without actually owning the actual currency. Once you withdrawal your funds, your contract for those funds are awarded to you and therefore “real Bitcoin” is sent to your destination address.
BitMEX offers two types of contracts…
Perpetual Contracts
Created specifically by the BitMEX team, this type of contract is also known as a “perpetual swap”. This is the type of contract you’ll be primarily trading when you’re first starting out, especially when you’re day or swing trading on a shorter timeframe (like 4 hour and below).
These contracts don’t have a specific date at which they will expire, so they are great for short term trading. They have a variable interest rate where cash flow is added or subtracted from your current equity.
As the name suggests, these contracts are continuously renewed. Perpetual contracts are also known supposed to be less volatile; however you wouldn’t think that’s the case when looking over their charts.
Futures Contracts
This is basically an agreement between a buyer and seller to exchange a currency at a defined date in the future for an agreed upon price. Futures contracts tend to have a fixed interest rate which makes them great for longer term trading, like swing trading (using the 4 hour charts) or shorter term investing.
The great thing about these contracts is that they have a fixed interest rate which doesn’t fluctuate over time.
Now that you have a basic concept of margin trading terms, let’s move on to the next step and cover short trades.
How to Short Cryptocurrency on BitMEX
BitMEX offers quite a few cryptocurrencies to short as of the release of this guide. The altcoins they include within their platform change constantly.
Bitcoin (BTC) is the only crypto that you can leverage up to 100X leverage.
Shorting works in the same way as a long position except you’re placing trades on the decrease in value of a particular currency. This would’ve been the ideal way of taking advantage of the extended 2018 bear market.
How Much to Leverage: A Warning to Newcomers
One of the more significant facets to margin trading with BitMEX is that you can leverage your trades with as much capital as you want. With that said, I recommend you keep the leverage to around 3X-10X to start. Anything above this and you’re risking liquidation. One false, call with a bit too much leverage, and your account can be wiped out in no time. If you’re trading with 20X and over on a longer term trade, you’re just looking for trouble.
If you do decide to leverage more than 20X, make sure you do it with a small amount. Experienced traders who scalp trade with 20X-40x are typically watching the charts like a hawk for any dramatic movements. If or when the trade moves against the trader, with strong full-bodied candles, stop losses are typically put in place. Never try this unless you have at least several months of BitMEX trading experience.
Always plan your trades out ahead of time and never trade in a rush. Typically, when you try to “catch a falling knife” or “catch a moving rocket”, things don’t end up going very well for you. The more adrenaline coursing through your body, the more idiotic your decisions become.
How To Open A BitMEX Account?
Use the following link to open the BitMEX account https://www.bitmex.com/register/Q1nfNX
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